14 KIPLINGER’S PERSONAL FINANCE^ 05/AHEADmore 529 plans. You can invest in
any state’s plan, but many states offer
a tax deduction or credit on contribu-
tions for residents who invest in their
state’s plan.
If your state has no tax break—
or if it’s one of a handful that offer
a break no matter which state’s plan
you choose—shop for a plan with low
fees and strong investment options.
You can often choose among age-
based portfolios that dedicate a higher
portion of the savings to riskier (but
higher-reward) stock investments in
your child’s early years and shift to a
more conservative allocation as col-
lege nears. Go with a direct-sold plan,
which comes with lower fees than a
broker-sold one. Compare plans at
Savingforcollege.com.
Tom and I went with Ohio’s
CollegeAdvantage Direct
529 Savings Plan (Ohio is
where we grew up, and
Tom has maintained res-
idency there as a mili-
tary officer). In addi-
tion to an initial chunk
of cash, we are having
$250 transferred into
it monthly. If we
keep up the contri-
butions and earn a
7% annual return,
we’ll have about
$119,000 in 18
years. Even if we
have to dial back
our savings later, we
hope that getting off
to a strong start will
put a sizable dent in
our son’s college bill. ■TO SHARE THIS COLUMN, PLEASE
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MILLENNIALS. YOU CAN CONTACT
THE AUTHOR AT LGERSTNER@
KIPLINGER.COM.Get a Head Start on College Savings
T
he morning after my husband,
Tom, and I learned that I was
pregnant, I found him quietly
tapping and clicking on his laptop.
If I weren’t already sure that we were
a match made in personal finance
heaven, that moment would have con-
firmed it: He was looking up projected
college costs a couple of decades down
the road.
A year later, we’re getting serious
about socking away money for our
son’s future education expenses. It’s a
daunting prospect. In 18 years, attend-
ing an in-state public school for four
years will cost about $233,000, assum-
ing 5% yearly inf lation in average col-
lege costs, according to the College
Board’s College Savings Calculator;
a private college will run $528,
(https://bigfuture.collegeboard.org/
pay-for-college/tools-calculators).
Plenty could happen before 2037 to
reduce the price of a college degree,
but I’m not counting on it.How much to save. A common
guideline is to save about
one-third of your child’s
expected college expenses
and cover the rest with
loans, financial aid and cur-
rent income while the child
is in college, says Mark
Kantrowitz, publisher and
vice president of research
at Savingforcollege.com.
That means we’d have to
save anywhere from $78,000 for
a four-year, in-state public school
to $176,000 for a private college.
The numbers are intimidating, but,
says Angie Furubotten-LaRosee, a cer-
tified financial planner in Richland,
Wash., “anything saved is better than
zero.” Thanks to the power of com-
pounding interest, even if you set asideonly a small amount, you’ll benefit
from an early start.
As you decide how much you can
afford to save, put your own needs
first. If you haven’t stashed at least
three to six months’ worth of living
expenses in an emergency fund or
paid off high-interest debt, focus on
those tasks. Retirement savings should
also take priority over paying for col-
lege. Your options for funding retire-
ment are limited, but your children
can apply for scholarships and grants,
take out loans, work part-time, and
choose relatively inexpensive schools.The 529 advantage. A 529 college-
savings plan is a great place to save.
Your contributions grow tax-free,
and withdrawals aren’t taxed as
long as you use them for quali-
fied college expenses, includ-
ing tuition, room and board,
books, and computers.
Generally, you’ll pay
income tax and a 10%penalty on earn-
ings—but not con-
tributions—for
nonqualified
withdrawals.
Every state
except Wyo-
ming has
one orMILLENNIAL MONEY Lisa Gerstner
POONWAT
CHARA-AMPHAIW
ANIT’S A DAUNTING PROSPECT.
IN 18 YEARS, ATTENDING AN
IN-STATE PUBLIC COLLEGE
FOR FOUR YEARS WILL
LIKELY COST A TOTAL OF
ABOUT $233,000.Commentary