Latest news with #stateAgencies
Forbes
10-05-2025
- Business
- Forbes
Here Are 6 College Savings Account Types You Should Know
College savings jar full of coins getty Funding college education is one of the most important financial goals you can have. While reports differ as to whether costs are rising or falling in recent years, college tuition is still a significant expense, even with financial aid and scholarships. Whether you are a parent, guardian, or student, understanding and comparing different savings options can help you plan better. This article explores six common college savings accounts in the United States. Named after Section 529 of the Internal Revenue Code, these plans are sponsored by states, state agencies, or educational institutions. A 529 plan is an investment account that features tax advantages and potentially other incentives that make it easier to save for college or other educational expenses. Most 529 plans have access to a range of investment portfolios, including age-based options that automatically adjust risk as the beneficiary approaches college age. While states offer different perks and benefits for contributing to 529 plans, a common feature is that your earnings grow tax-free at the federal level. Withdrawals used for qualified education expenses, such as tuition, room and board, books, and other mandatory expenses, are also tax-free. There is no federal contribution limit for 529 college savings plans, but each state sets their own, ranging from $235,000 to more than $500,000 per beneficiary. For example, you can contribute up to $529,000 in California, $350,000 in Kentucky, and $269,000 in North Dakota. Incidentally, Wyoming is the only state that does not offer a 529 plan. Funds can be also transferred between beneficiaries if one child doesn't use all the money. The Tax Cuts and Jobs Act of 2017 has also expanded the use of 529 funds to include up to $10,000 per year for K–12 tuition and a lifetime limit of $10,000 for student loan repayment. As such, 529 plans are ideal if you are seeking a long-term, tax-efficient vehicle for college savings. Their high contribution limits and broad eligibility make them accessible to most households. This is another type of 529 plan administered by state governments. It allows you to purchase future college tuition at current prices, helping you lock in costs and better plan your finances. Unlike 529 college savings, prepaid tuition plans are considered conservative since they do not typically have an investment component. Nonetheless, they are reliable vehicles that can shield you from rising college costs. You must note that prepaid plans cover only tuition and mandatory fees, not room and board or other expenses. They are also limited to public in-state colleges and universities, meaning if a beneficiary chooses to attend a private or out-of-state institution, the plan may pay only a portion of the tuition equivalent, which could significantly reduce its value. Lastly, many prepaid plans have residency requirements. Hence, these plans are best suited if you are confident you or your child will attend an in-state public institution. This is a special savings account that can be used for both K–12 and higher education expenses. These accounts are not state-sponsored but are instead established through financial institutions. A Coverdell ESA allows tax-free growth and tax-free withdrawals for education expenses. However, unlike 529 plans, the range of qualified expenses is broader and includes other items like tutoring, school supplies, and uniforms. A major drawback of the ESA is its relatively low annual contribution limit, just up to $2,000 per beneficiary. There are also income limits for contributors, adjusted periodically. This year, eligibility phases out for modified adjusted gross incomes between $95,000 and $110,000 for single filers, and $190,000 to $220,000 for joint filers. The funds must also be used by the time a beneficiary turns 30. If not, the remaining balance must be transferred to another eligible family member or will face taxes and penalties. Coverdell ESAs are ideal if you want to be able to use the funds for a wide range of education expenses, especially during your child's K–12 years. Custodial accounts, established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA), allow adults to transfer assets to a minor without establishing a trust. These accounts are not specifically designed for education but can be used for any purpose that benefits a child. These accounts do not offer the same tax advantages as 529 or Coverdell accounts. A portion of the earnings is subject to the kiddie tax, where the unearned income may be taxed at a parent's marginal rate. Importantly, the assets in a custodial account become the child's legal property when they reach the age of majority (18 or 21, depending on the state). Custodial accounts are best suited for families who want to make financial gifts to a child without restricting its use solely for education. They are also useful when larger gifts are planned that exceed annual gift tax exclusions. A Roth IRA is typically a retirement savings vehicle, but it can also be used for education expenses. Contributions to a Roth IRA are made with after-tax dollars, and earnings grow tax-free, like 529 savings plans and Coverdell accounts. While early withdrawals of earnings usually incur penalties, Roth IRAs allow for penalty-free (but not necessarily tax-free) withdrawals if used for qualified higher education expenses. Your contributions can always be withdrawn tax- and penalty-free. The annual contribution limit for Roth IRAs in 2025 is $7,000, with an additional $1,000 catch-up contribution for those age 50 or older. Eligibility phases out between $146,000 and $161,000 for single filers and $230,000 to $240,000 for married couples filing jointly. Remember that using a Roth IRA for education depletes your retirement savings so you must weigh the opportunity cost of sacrificing long-term growth for near-term expenses. Roth IRAs work well for families seeking a multi-purpose account with flexibility. Of course, you can also use a traditional savings account. You can open a separate savings account in a bank or credit union, and earmark it for future educational expenses. They are accessible and easy to open, have no age restrictions, and are FDIC-insured up to $250,000. However, interest rates on these accounts are relatively lower, compared to the other options, so your savings may not earn enough to keep pace with inflation. They also do not offer tax benefits for education expenses, which means your earnings may be subject to federal or state taxes. You can use traditional savings accounts as a supplement to your other college savings. You may also use it as a kind of college emergency fund. Before you choose which college savings account to use, consider your household income, target educational institution, future financial aid eligibility, tax implications, and your long-term goals. You may also layer strategies to maximize flexibility and tax efficiency. As each family situation is unique, consider seeking professional advice. These experts can provide you with tailored guidance based on your specific needs and circumstances.
CBS News
07-05-2025
- CBS News
Real IDs are required to travel domestically starting today. Here's what to know.
Don't have a Real ID? Here's what to expect if you're flying After nearly 20 years of delays, the Real ID deadline is finally here. Beginning May 7, Americans planning to travel domestically are required to use the enhanced form of identification. The Transportation Security Administration said it will no longer accept IDs that don't comply with Real ID requirements. The TSA said it's seeing about 81% compliance at airport checkpoints, meaning roughly four out of five travelers are showing up with a Real ID-compliant driver's license or another valid form of identification. If you still need to update your ID, you're not alone. CBS News data shows that dozens of states are behind on compliance. You can still travel without a Real ID, but will need to bring another acceptable form of identification, as outlined by the TSA. Here's what you need to know as the Real ID requirements takes effect on Wednesday. What is a Real ID? The Real ID is a federally compliant license, learner permit or nondriver ID card issued by state driver's license agencies. You can tell if a state-issued license or ID card is a Real ID if it has a black or gold star in the upper right corner. The symbol might look slightly different depending on the state from where it's issued: California, for example, puts its star symbol inside a golden bear. Who needs a Real ID? Real or Enhanced IDs are required for those over 18 who plan on flying domestically or entering a federal building that requires identification, unless they want to bring a valid U.S. passport. When will I need to use a Real ID? Americans will need to show Real IDs to access certain federal facilities — including TSA checkpoints — enter nuclear power plants and board commercial aircraft, according to the Department of Homeland Security (DHS). Am I required to get a Real ID? Real or Enhanced IDs are only required for those over 18 without a valid U.S. passport who plan on flying domestically or entering a federal building that requires identification. That's said, Real IDs are considered a more secure form of identification than a classic driver's license. The requirement for Real IDs was established by Congress in 2005, following the 9/11 Commission's recommendation that the Federal Government "set standards for the issuance of sources of identification, such as driver's licenses," according to the Department of Homeland Security. The deadline for implementation has been delayed several times, although some states started issuing Real IDs as far back as 2009. You can find more details on Real ID on the DHS' website. Can I use an Enhanced ID instead of a Real ID? Five states — Washington, Michigan, Minnesota, New York and Vermont — issue what is called an Enhanced Driver's License (EDL), or Enhanced ID. This is considered an acceptable alternative to a Real ID card. Whereas Real IDs have a star emblem, Enhanced IDs have an image of the U.S. flag in the top right corner or the word "Enhanced" at the top of the card. Both Real IDs and Enhanced IDs are federal documents that allow holders to fly domestically. Enhanced IDs also allow you to travel from the U.S. to Canada, Mexico or the Caribbean through a land or sea port of entry, without a passport — something you can't do with a regular Real ID. How much does a Real ID cost? Prices vary by state. In New York, for example, there is no additional fee for a Real ID beyond the normal transactional cost you pay for a standard license, ID or renewal. Pennsylvania, however, charges a "one-time $30 Real ID fee" on top of standard renewal fees. New York charges an additional $30 fee for Enhanced IDs. It's best to check your state's Real ID guidelines for an accurate estimate of how much you'll pay. The same goes for Enhanced IDs. How do I get a Real ID? Can I apply for one online? Each state has a driver's licensing agency that issues Real IDs. To find out how to apply where you live, visit the DHS website and click on your state of residence for specific instructions. DHS recommends that you visit your state's driver's licensing agency website to find out exactly what documentation you'll need to brings in order to obtain a Real ID. Be sure to plan ahead as some states have longer wait times for DMV appointments. What if I am planning to travel this week but I don't have a Real ID yet? A TSA spokesperson told CBS News Philadelphia that if travelers show up to the airport next Wednesday without a Real ID they may still be able to fly, but getting on board the plane may take longer than usual. The transportation agency recommends that people without a Real ID arrive at the airport three hours early to ensure enough time to get through security. "We don't have concerns at this point about this deadline really impacting operations, especially for those people who again are prepared and have everything they're supposed to have," Jessica Mayle, a public affairs specialist at TSA, told CBS Philadelphia. Are there alternative forms of identification I can use at the airport? If you don't have a Real ID, TSA has a list of other valid forms of identification you can use to get through an airport checkpoint. This includes passports, permanent resident cards, Enhanced IDs and Global Entry cards. Can I use a Real ID for international travel? No. You will still need a valid passport to travel outside of the country and go on international cruises.
