BOSTON (CBS) – A college degree could be worth well over a $1 million dollars to your kiddo. That’s the average pay difference over a working career between having a high school diploma compared to a college degree.
Best advice, start stashing it away for college as early as you can. Before you even try potty training.READ MORE: Nearly Half Of COVID Hospitalizations In Massachusetts Are 'Incidental'
A good place to start is with a 529 Plan. These college savings plans can be set up so that the money is invested in mutual funds and grows tax free and if used for college are tax free when withdrawn.
Consider this. You invest $20,000 in the plan and it earns 7% over 15 years so it’s now worth $55,000. You will not owe Massachusetts or federal income tax on $35,000 of earnings. That could be a savings of almost $10,000 that can be used for the kiddo’s school expenses.
And Massachusetts just threw in a bonus, Effective January 1, through the 2021 tax year, contributions to Massachusetts 529 plans of up to $1,000 per year by an individual, and up to $2,000 per year by a married couple filing jointly, are deductible in computing Massachusetts taxable income
Massachusetts offers two options, the UPlan and the UFund. The UPlan enables families to lock in future tuition and fees at today’s rates at almost 80 participating Massachusetts colleges and universities.
The UFund is a College Investing Plan. It offers parents, grandparents and others a way to invest for college. Participants invest in structured portfolios of professionally managed mutual funds or a portfolio of mutual funds of your choosing. The money is held in a custodial account so it does not belong to the beneficiary, the student.
Proceeds from the UFund can be used at almost any accredited college in the country. They can be used to pay for not only tuition and fees, but other qualified education expenses as well, including room and board, supplies and equipment, like the new computer the school requires. But not the car the kid thinks he requires on campus.
One more thing: For the record, I opened a MASS 529 plan with Fidelity for my granddaughter when she was 3 days old. She’s now 11. I contribute money into her plan twice a year. Christmas and on her birthday. Plus I have a Fidelity credit card and the points that I earn go automatically into her college fund. But I still worry about having enough.
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You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m. and 3:55 p.m.
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