SAVING FOR COLLEGE
 
These days, a college degree is important to anyone’s recipe for success. A college education can open doors to knowledge, opportunity, and experience. It is one of the most important gifts you can offer a child – and one of the biggest investments that you will ever make. Of course, planning to go to college is one thing; paying for it is another. Today the cost of a four-year college education can be anywhere from $40,000 to in excess of $100,000 and rising. Funding a college education, just like any major financial goal, is something you can achieve. All it takes is commitment and some careful planning. It is never too soon, or too late, to begin.

To help you take the first step; New York State and the Internal Revenue Service are offering new programs specifically for saving for college. These programs offer tax incentives that will trim your tax bill while you fund a college savings plan for your child, grandchild, yourself, or any other individual:
 
New York’s College Savings Program
This program is an extraordinary opportunity to help make college more affordable for New Yorkers. It’s simple: Parents, grandparents, relatives, or friends can set up a Tuition Savings Account for a future college student. The first $5,000 ($10,000 for joint filers) invested each year will be deductible for New York State income tax purposes – and all of the investment earnings will be tax-free in New York State – as long as the money is used for qualified higher education at any accredited college in the United States. Federal tax on earnings is deferred until the student uses money for college expenses.

Be12/31/07>money each pay period, or as often as you like, into a trust fund whose assets will be invested in funds managed by Teachers Advisors, Inc., a subsidiary of TIAA, a part of TIAA-CREF. Based in New York, TIAA-CREF has over 80 years’ investment experience and currently manages over $200 billion.

Anyone can open a New York College Savings Account. It doesn’t matter where you live or work. There are no restrictions on income. All contributions will be fully state tax deductible even if you do not itemize deductions. You may designate anyone as the beneficiary. There are no restrictions based on age, relationship to the account owner, or residency of either the account owner or the12/31/07. You can also change the beneficiary at any time to benefit another member of the beneficiary’s family. Funds in these accounts will not be considered when determining eligibility for financial aid for NYS colleges.

An account can be opened at any time, but it must be open for at least 36 months before funds can be withdrawn without penalty to pay for education expenses. For more information on the program, including a list of frequently asked questions, log on to the web site at www.nysaves.com, or call 877-NYSAVES for a free brochure and application. Also, feel free to ask us how a contribution to a college savings account will impact your tax liability.
 
EDUCATION IRA

Starting in 1998, you can put $500 a year into a new education individual retirement account for any child under age 18. Contributions to this account are not tax deductible, however they grow federal and state tax-free until the funds are withdrawn for educational expenses. Certain income restrictions limit those who are eligible to contribute to an education IRA. Even if the parents aren’t eligible, the grandparents may be. Or, even the child may contribute to his own account.

Some people sneer at these tax-sheltered savings accounts because of the low Contribution cap. But after socking away $500 a year for, say, 15 years with an annual return of 10%, your kid’s education IRA would be worth some $15,900, which you could then withdraw tax-free to pay college expenses. Your cost would have been only $7,500 over a 15-year period.

Education IRA’s do not make sense for everyone. In particular, there are three drawbacks. First, in any one year that you fund an education IRA, neither you nor anybody else can put money into a state sponsored tuition program. Second, education IRA’s will probably impact financial aid eligibility. Finally, once your child is in college, you can’t claim the new Hope or Lifetime Learning credits in any year that you withdraw from an education IRA.

Education IRA’s can be opened at most banks. Funds can be contributed until the child reaches age 18. Funds must be used before the child reaches age 30. Excess funds can be transferred to another member of the child’s family who is under age 30.
Feel free to ask us if an education IRA makes sense for you.

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