If you've been wondering about 529 age-based options, this short video will explain what they are and how they work.
3 tips to make the most of your 529 savings
3 tips to make the most of your 529 savings
For many children, college will be one of the most influential experiences of their lives.
It's where they'll expand their minds, discover who they are, gain knowledge, and begin to build a future.
It's also expensive. That's why saving now is so important.
What can you do to increase your chances of success?
Check out these 3 tips.
One, start early. Like with any goal, the earlier you save, the better.
The longer you keep your money invested, the more time it has to add up and potentially grow.
Why's that? Introducing the power of compounding.
Compounding happens when you continually reinvest your returns, and those returns earn more returns and so on.
To demonstrate, let's look at a hypothetical example. Let's say you set aside $1,200 a year, or $100 a month in a tax-free account such as a 529 college savings plan. That's a total investment of $21,600 over 18 years. But if your account earns 5% a year, you'll actually have about $35,400 at the end of 18 years.
Legal note: This hypothetical example doesn't represent the performance of any particular investment. The ending balance doesn't take into account any taxes that may be due. Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
That's a big difference. Save now and thank yourself later.
Two, invest regularly. It's not enough to save early. It also helps to invest often.
A lot of 529 plans offer ways to automate your savings, which makes it easy. Consider setting up a schedule for moving money between your bank account and your 529 account with an automatic investment plan. Or if your employer offers payroll deduction, you can save for college with every paycheck.
Let's look at why it pays to invest regularly. Remember that $100 you were setting aside each month.
Legal note: A plan of regular investment cannot assure a profit or protect against a loss in a declining market.
What happens if you forget to do so for say 3 months out of the year. Instead of putting aside $1,200 a year, you were saving $900. If you consistently miss investments over the years, you may wind up with more than $9,000 less.
Avoid missing a beat by saving automatically, you'll be regularly adding to your account without even thinking about it.
Three, focus on the long term. One of the best ways to achieve your goal is to see the big picture. Of course, it's a good idea to take a look at where your college savings are invested once a year to make sure they reflect the amount of risk you're comfortable with and your child's age. If you need help, we've got lots of tools to help you with your strategy.
When markets are volatile, it's easy to get caught up.
For example, if you invest in stocks you can expect some downturns. Don't panic or get market jitters. If you rashly swap investments during a downswing, not only could you lose any money gained, but you could lose out on the potential upswing. In the long term, that setback is just a blip on the radar. It's important not to let your emotions take hold of your investment strategy.
That strategy is unique to your situation. Having a plan and sticking with it could keep you from making costly mistakes based on short term events.
And that about wraps up our 3 tips for making the most of your 529 savings.
Remember, to help increase your chance of meeting your college savings goals:
- Start early,
- Invest regularly, and
- Focus on the long term.
Investment returns are not guaranteed, and you could lose money by investing in the Direct Plan.
If you have questions about contributions made by payroll deduction through your employer, call 877-NYSAVES (877-697-2837). Please read the Disclosure Booklet and Tuition Savings Agreement P D F document opens in a new window before making an investment or sending money.
This website contains links to other websites as a convenience to users. However none of the Program; The New York State Office of the State Comptroller; the New York State Higher Education Services Corporation; The Vanguard Group, Inc.; Ascensus Broker Dealer Services, Inc.; nor any of their affiliates endorses or takes any responsibility for any such website or for any information contained thereon, except, in each case, with respect to their own websites.
Before you invest, consider whether your or the beneficiary's home state offers any state tax or other benefits that are only available for investments in that state's 529 plan.
The Comptroller of the State of New York and the New York State Higher Education Services Corporation are the Program Administrators and are responsible for implementing and administering the Direct Plan.
Ascensus Broker Dealer Services, Inc., serves as Program Manager and, in connection with its affiliates, provides recordkeeping and administrative support services and is responsible for day-to-day operations of the Direct Plan. The Vanguard Group, Inc., serves as the Investment Manager. Vanguard Marketing Corporation markets, distributes, and underwrites the Direct Plan.
No guarantee: None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, Inc., Ascensus Broker Dealer Services, Inc., nor any of their applicable affiliates insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio.
© 2016 State of New York.