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Funding Your Child's Future 101


Funding Your Child’s Future 101

By Michael S. Wallman, Vice President / Financial Advisor
The Canseco Financial @ Raymond James Financial Services.
With springtime almost here, many high school seniors are eagerly anticipating the arrival of college acceptance letters. And although this may be an exciting time for teenagers anxious to start a new phase in their lives, it can generate concern for many parents who aren’t financially prepared to help their children finance a quality college education.

Don’t make the same mistake. The many education incentives in the Economic Growth and Tax Relief Reconciliation Act of 2001 can make planning for your children’s future more attractive than ever.

From the perils of freshman year to the challenges of senior thesis statements, your students will need funds for everything from books and pens to food and shelter. The new tax legislation offers many advantages that can help ease the financial planning process necessary to finance four years of higher learning. The act includes significant changes in rules governing both education savings accounts and 529 savings plans. Here’s what you need to know about these two popular ways to save for your child’s or grandchild’s tuition nest egg.

Education savings accounts – For each child under age 18, the contribution limit for ESAs has been raised to $2,000 annually, up from $500. Although contributions are not tax deductible, the beauty of this account is that funds grow tax-free and are not taxable when withdrawn, as long as the funds are used to pay tuition for private or state-sponsored college, or for ancillary expenses like tutoring or computers.

What’s more, married couples earning as much as $220,000 a year will now be able to open accounts. Previously, the limit was $160,000.

529 savings plans – College savings programs that combine tax benefits with professional portfolio management, 529 plans are similar to ESAs because they now include tax-free* qualified withdrawals, as long as the funds are used for higher education. Some states offer state income tax deductions, as well.

The biggest change, however, is in the portability of these accounts. Beginning this year, money can be transferred tax-free from one qualified tuition program to another for the same beneficiary. However, only one transfer may be made within any 12-month period.

The warm breezes of spring bring an exciting time for your children. Help ensure they can achieve their dreams by contacting me today to discuss how you can help plan for their future.

*This provision is subject to potential sunset revisions on December 31, 2010. At that time Congress may change the tax-free withdrawal status for qualified education expenses.

For more information please call Michael @ 305-865-4300

You may find Michael online with the Canseco Financial Group @ Raymond James Financial Services at