529 EDUCATION PLANS

As the cost of education continues to rise, Michigan families are looking at different ways to fund their children's education, like 529 savings/investment plans while providing tax advantages.

The Michigan Education Savings Program allows parental guardians, students and even friends to pay for the college expenses of a designated beneficiary ahead of time.

The National Center for Education Statistics conducted a 2014-2015 academic year study to determine the average annual cost of education, including tuition, fees and room and board. Results showed education costs were estimated to be $16,188 for public institutions, $41,970 for private nonprofit institutions, and $23,372 at private for-profit institutions. The data from the study revealed a 26 percent increase in cost for public institutions and 33 percent for private since the 2004-2005 academic year.

If the rise in annual tuition and fee rates are any indication of what the cost of education will be In 10 years, many should be alarmed.

Named after section 529 of the Internal Revenue Code, 529 plans can be eithei prepaid or savings plans. The savings option allows you to invest contributions based on the market performance investments, like mutual funds. Prepaid plans allow parents to pay the total cost of an in-state public college education according to today's rates in advance.

Opening an MESP costs $25 with minimum contributions as low as $15 that can be automatically deducted via direct deposit. Starting a MESP has many benefits, including federal tax breaks, as earnings are not subject to tax when used for eligible college expenses.

Currently. MESP offers four ways to fund your beneficiary's education. They include age-based investment, guaranteed investment, multifund investment, and single-fund investment.

Age-based investment provides the opportunity to match the investment and level of risk according to the projected payout date by considering the current age of the beneficiary and how many years before the beneficiary turns 18 or is expected to begin college. For this option, the risk level automatically changes from aggressive to conservative as the beneficiary gets closer to 18.

The guaranteed investment option is considered best for people who want a low-risk, stable return and have shorter time frames from investment to payout.

Multifund investment options are for people who prefer to select an option for its specific asset allocation. Each is allocated to multiple funds and/or funding agreements and has a different investment objective and investment strategy. Options do not change automatically as the beneficiary gets older.

With the single fund option, payout is entirely based on the performance of the underlying fund. Under this option, participants do not own shares of the underlying funds directly, making this best for people who want specific single funds such as equity index, money market or social fund options.

Plans vary based on many different factors. To find the right plan for your family or for more information, visit www.Misaves.com.