One Date Parents Shouldn’t Ignore: 529 College Savings Plan Day – Money 2020

With the cost of a four-year degree rising almost eight times faster than wages since the 1980s, those two questions are enough to give today's parents a serious case of night sweats. You can discuss the reasons for the disconnection: administrative costs? Luxury services? - But you know there is a problem when a writer in Education Week is outraged.

"Madness," he denounced.

That is one more reason to write May 29 on your calendar.

Also known as National University Savings Plan Day 529 - Do you understand? 5/29? - It is the perfect time to consider establishing one of those 529 plans with tax advantages, as they are called, to help save money to cover tuition, books and other expenses related to education in most of the two accredited universities and four years, universities and vocational-technical schools.

"It's a way to prevent your son or daughter from paying too much debt when it's time to start their careers," said Melissa Ridolfi, vice president of retirement and university products at Fidelity Investments. "In addition, any investment gain is compounded on a deferred tax basis, and qualified withdrawals are completely free of federal and state income taxes."

And now to the big question: how much?

Two factors are mainly at stake:

* Public schools vs. private. The difference in cost can be as amazing as "Avengers: Endgame's", a record of $ 357.1 million in the national opening weekend tour: an average of $ 21,370 a year in the first, according to the latest figures from the College Board, compared to $ 48,510 in the latter.

* The percentage of the bill you plan to pay. If you had scholarships and other grants to pay all or most of the bill, you should probably rethink that unless your child is a prodigy child in good faith or a soccer star. Sallie Mae's 2018 report "How the United States pays for college" found that both categories combined paid only 28 percent of the university's costs.

OR
I don't believe where 47 percent of the costs came from. That's right, "family income and savings," with another 24 percent covered by loans.

In other words, as Ridolfi said, "in any way I look at it, the family is committed to paying most of the university expenses." Which probably helps explain why a recent Fidelity study found that parents begin to save more and more before their child even reaches the age of two.

Or, especially if you want a more personalized estimate, one that allows you to play with percentages and toggle between public and private schools, the company's free online university savings calculator takes away the anguish of doing the calculations yourself.

Fidelity provides 12 savings ideas to help you achieve your own goal, and offers a choice of two different investment strategies in the 529 savings plans you manage, including an age-based fund portfolio that automatically becomes more conservative as that the beneficiary approaches university age.