Retirement & Financial Planning Report

Since 2000, by the Consumer Price Index has risen a total of 34%, reflecting the overall level of inflation in the broad economy. Generally, you’d need $13,400 now to buy what $10,000 bought at the start of this century. At the same time, though, college tuition has increased much faster–some reports say the cost is up by 300%. A $5,000 tuition bill in 2000 might be $20,000 now.

If you have one or more youngsters who are heading for college in the future, what can you do?

* Don’t panic. Although the published costs have increased, so have financial aid and tax breaks.

* Invest through 529 plans. Offered by all states, 529 plans offer untaxed investment income inside the plan. Withdrawals are tax-free if the money is used for college. Many plans offer state income tax deductions for contributions by state residents.

* Consider prepaid tuition plans. With most 529 plans, your returns are determined by how well chosen investments perform. Some states offer 529 plans with returns guaranteed to match the inflation in tuition prices. They offer all the tax breaks of conventional 529 plans. You may have to pay a premium to enroll in prepaid tuition plans, so read the fine print carefully.