As I work on figuring out our 2015 savings goals, we know that college savings for Baby Sam is on the list.
We have settled on a 529 Plan rather than a prepaid tuition plan.
The next question is how much to contribute. $28,000 is the current annual limit if you file taxes jointly, $14,000 if filing singly status before having to do gift tax analysis.
Mr. Sam is in favor of skimping to front load Baby Sam's college fund now and then once Baby is in school dialing back because there is a good chance we will be paying for private school.
I'm not sure where I stand on the issue, but because I manage the finances I prefer more regular and even contributions because its easier to manage. But, if we contributed $28,000 a year for year one to year five we would end up with $140,000 and that is a huge chunk of money that would then grow over the next 13 years.
Start researching estimated college costs in 2033 and its enough to make your head spin. $57,000 a year for public, in-state university up to $130,000 a year for private university. Multiply that by four - five years and you get total costs from $285,000 to $650,000. Yikes!
However, many experts say that the tuition increases that have occurred in recent years, 5% - 7% increases each year, are simply unsustainable. So, its quite difficult to know what the real costs will be. I guess its better to plan high and then be pleasantly surprised, but I don't want to sacrifice retirement savings or other savings to hit an inflated college savings number.
At present, the 529 plan paperwork is filled out, I've sent off the check for the initial contribution and I have set up bi-monthly electronic contributions at $50. Not much, but a start while we figure out how much we will be contributing going forward.