State-approved individual retirement account

Reference no: EM13692531

A 529-state-approved individual retirement account (IRA) permits parents to invest tax-free dollars into their children’s college education fund (this money may only be used for educational expenses). Another popular plan, the Roth IRA, requires after-tax dollars to be invested in a savings fund that may(or may not) be used for paying future college expenses. Clearly, the 529 IRA plan is a better way to save for college expenses than the roth IRA. Quantify "better" when the marginal income tax rate is 28% and $10,000 each year is invested in a mutual fund earning 8% per year for 10 years. Note: the estimated cost of a college education 10 years from now is %110,000. (7.7)

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Reference no: EM13692531

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