Monday, January 05, 2009

Financial planning with a baby

Started saving for college

With the rate college tuition are going, prepaid college plan might be a good idea since mutual funds are not earning as fast as the cost of the tuition. Florida Prepaid College Plan

Open a 529 college savings plan - allows the college savings to grow tax-free. When you take money out to pay for college (including room and board), no taxes on earnings.

529 plans offer unsurpassed income tax breaks. Although your contributions are not deductible on your federal tax return, your investment grows tax-deferred, and distributions to pay for the beneficiary's college costs come out federally tax-free. The tax-free treatment was made permanent with the Pension Protection Act of 2006.

As your kid getting ready for college within 5 years, be sure to watch the market and move the investment to a no risk portfolio. When you need the money, you need take the risk out and make sure the portfolio doesn't decrease.