ROCHESTER, N.Y. (WROC) — An early start and proper planning can go a long way toward saving for college.
CPA Scott Adair discussed some of the best strategies for saving Thursday during News 8 at Sunrise.
“There is approximately $1.6 trillion of college debt outstanding as of today,” said Adair. “The average college student leaves college with about a $29,000 debt associated with that cost.”
Adair said planning is an essential component in saving for college. “We need to think about the various types of vehicles that we can use to fund college costs in the future. They include those 529 College Savings Plans that are out there, your traditional Roth plans that are out there, savings accounts, savings bonds, all of those types of things can be used in order to fund today for that future cost of college.”
A 529 plan gives savers certain advantages. “With the 529 plan you make a contribution to it,” Adair explained. “Effectively there’s no tax deduction at the federal level for that plan but at the state level inside of New York State you do get a deduction. The contributions are non-deductible but the earnings when you use them for a qualified expense such as college tuition, room and board, books – that type of thing – you don’t pay any additional tax on any of the earnings that have been earned on that 529 plan. So again, you need to check with your tax advisor on the State tax advantages of it but certainly they are available to you.”
Roth RIA plans offer more flexibility for savers than 529 plans. “It’s traditionally for retirement purposes so if you don’t use all of that money or the child does not wind up going to a higher education institute you can still use that money towards your retirement savings,” said Adair.
Building saving into your monthly budget is vital according to Adair. “I hate to sound like a broken record but I feel like we talk about this almost every time we’re on. That household budget is so important to have and a portion of that household budget needs to be saved for educational costs in the future, whether that be school, whether it be K-12 schooling or higher education.”
For more “Smart Money” advice, visit the New York State Society of CPAs website at NYSSCPA.org/getmoneysmart.