Money Matters: Options for the College Savings in a Volatile Market

Published: Aug. 9, 2022 at 9:09 AM EDT|Updated: Aug. 9, 2022 at 9:14 AM EDT
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COLUMBIA, S.C. (WIS) - If you have a 529 savings plan, you are probably aware that the market volatility has eaten into your investment. So, what should you do if you plan to tap into that money anytime soon?

Josh Bradley from Capital City Financial says whether you’re using a 529 plan or any other investment plan, a little bit of calm may be needed with the volatility. If you’re still five years out from needing to tap into that money for college, it’s best to wait it out. As the market recovers, then you should move more to conservative investments.

If you are less than five years away from needing the money, you may want to make some allocation changes to some safer investments.

Will there be anything changing with the federal student aid packages like “parent plus loans”?

Rates are going up. If you are looking at these loans and budgeting the payments, understand that with interest rates going up, your payments will go up.

For parents, you want to be cautious looking at variable rate loans which could see your cost spiral as time goes on.

Are there any other tips for college savings?

The 529 plan through the state is usually your best option. With that plan, you get a state income tax deduction for the money you put in, it grows tax-deferred and when you tap into it, it’s tax-free if you use it for college or other educational purposes.

You also still maintain ownership of the plan so you can always pull the money back if you needed to.

Your child may also qualify for the state scholarship program and tons of grants and other merit scholarships that you should look into.

You can also look into starting a Roth IRA that provides tax-free growth for your child as well.

The key is to start early and save as much as you can.

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