$500,000! Are you kidding, $500,000? When I heard the price from our financial advisor I tried to act cool, but inside my heart started to beat a little faster, and I could feel my body temperature rise. You see, $500,000 is not the cost of a new house, but the amount it would take to put all three of our kids through college (my oldest is 11). Oh yeah, and that was only if we only had one attend a UC school and the other two at a CSU. Don’t even talk about private schools..
Walking back to the car, Lena and I immediately started doing the math and it didn’t take long to realize the chances of saving a half a million dollars over the next decade was simply not going to happen – short of a winning Powerball ticket (which as of the time of this writing hasn’t happened). Like many parents, we started saving for college when our kids were born, but also like many of our friends, we can’t always fund those accounts on a regular basis. We do what we can, but know it will not be enough. Here in California, it is, even more, difficult considering we have the highest state income, fuel, and sales taxes in the nation. But one tax saving tool we are utilizing and is available to everyone is the 529 program. To best define what a 529 is and how it works I pulled the following summary from Americans for Tax Reform:
Under current law, 529 plans work like Roth IRAs: you put money in, and the money grows tax-free for college. Distributions are tax-free provided they are to pay for college.
Before 2001, the growth of your 529 plan was not tax-free. Instead, earnings were taxed as they were withdrawn, even if it was used to pay for college. Eliminating the tax on 529-plan withdrawals for education costs was passed by President George W. Bush and a Republican Congress in his first year of office.
So it was with some intrigue we listened to the State of the Union where the President proposed two “free” years of community college to “everyone who’s willing to work for it.” A plan like that sounds great especially in a community like Santa Clarita where we have one of the most elite community colleges in California – College of the Canyons (COC). Run by a tremendous Chancellor and Board of Trustees, with a committed faculty (disclaimer – Lena is a professor at the school) COC affords its students the opportunity to receive the highest level of education at a cost affordable to most of its students.
But of course, we all know “free” isn’t really “free.” In this instance, Obama’s definition of free was to roll back the Bush plan and eliminate one of the few tax breaks all Americans can take advantage of and once again punish those who are working hard every day to save for their kids higher education.
Now I don’t pretend to understand what goes on in the West Wing, but you have to worry really when no one in the Administration who reviewed the State of the Union speech had any idea as