Читать книгу More Straight Talk on Investing - John J. Brennan - Страница 40

There are a variety of ways to save for college, and the investment vehicle that's best for friends or relatives may not be the best one for you. The trade-offs involve costs, taxes, financial control, investment choices, and the impact that the plans have on eligibility for financial aid. Here is a brief look at the three popular ways to save for college.

 529 College Savings Plans are a tax-advantaged means of accumulating money to pay for college or graduate school. These plans, named for a section of the tax code, are usually sponsored by states and have emerged as the go-to accounts for many Americans. The earnings of 529 accounts are exempt from federal income and capital gains taxes so long as the money goes for qualified school expenses. You are not relegated to investing with the plan in your home state, and some states offer deductions on contributions. And there are no income limits to be eligible to use the plans. 529 plans may also be used to pay up to $10,000 in student loans. The main drawbacks of 529 plans are the overwhelming number of choices both among state plans and investment options in those plans and, in some cases, high costs of those options. The sponsoring state selects the investment manager and investment options available to you. In addition, some 529 plans layer administrative fees on top of the fees charged by the underlying mutual funds. Before investing, do some comparison shopping. The effect of 529 College Savings Plan assets on eligibility for financial aid depends on who is the named owner on the account. A 529 account held in a parent's name will cut into financial aid eligibility far less than will an account held in the student's name.

 Education Savings Accounts (ESAs; formerly known as Education IRAs) are another, but less commonly used, tax-exempt investment vehicle. You can contribute up to $2,000 a year on behalf of a beneficiary under age 18, assuming that you do not exceed income limits. The funds can be withdrawn tax free to pay for qualified educational expenses at primary schools, secondary schools, colleges, and universities. Another plus: You may choose the financial provider and the investments for your ESA, so you'll have a wide array of investment options from which to choose and can seek out low-cost options. With ESAs, the main drawback is the low maximum contribution. An ESA account alone may not enable you to save enough to cover four years of college. In addition, assets in an ESA count heavily against a child's eligibility for financial aid. In financial aid calculations, ESA assets are considered to be the student's property. As a result, financial aid providers will expect that up to 25% (for college aid) or 35% (for federal aid) of the ESA will be spent for college each year.

 UGMA and UTMA Accounts are custodial accounts for children established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act (hence the acronyms). These accounts have been around for decades. With an UGMA/UTMA, you or another adult custodian opens an account on behalf of a minor at the financial institution of your choosing and invest as much as you like.They offer fewer tax benefits than the other savings programs. For children under 14, the first $750 of annual investment income is tax-free; the next $750 is taxed at the child's tax rate; income above $1,500 is taxed at the parents' rate. All income for children 14 or older is taxed at the child's rate. Also, when the beneficiary reaches the age of majority, he or she takes control of the assets—whether to pay for college or buy a sports car. In college financial aid calculations, UGMAs/UTMAs are considered the property of the student, so aid providers will expect up to 25% (for college aid) or 35% (for federal aid) of the assets to be used for college each year.