One or more may be appropriate for you. Be sure to discuss these options with your tax or legal advisors.


U.S. Savings Bonds-For years, Series EE bonds have been synonymous with saving for college. Their safety, lack of sales fees, and backing by the U.S. government are a few of the reasons for savings bonds' popularity. Series EE bonds are not subject to state or local taxes and may be free of federal taxes for those qualifying investors who use the bonds solely for their child's college education.

Zero Coupon Bonds
-Zero coupon bonds have become popular college-funding devices and are well suited for other long-term financial needs such as retirement. Zero coupon bonds do not pay current interest but instead are sold at a deep discount to the face value. Investors collect the full face amount upon maturity, which is typically several years down the road. A zero coupon bond generally earns a higher return at maturity than a Series EE savings bond of similar maturity.

Coverdell Education Savings Accounts-This account allows single individuals with a modified adjusted gross income of up to $110,000 and married individuals filing jointly with up to $220,000 in modified adjusted income to contribute a maximum of $2,000 (non-deductible), per child (under the age of 18), per year. Tax-free withdrawals may be used to pay for qualifying college costs and may include elementary and secondary school expenses. Covered expenses include tuition, fees, room and board, books, computer equipment, and uniforms. The $2,000 maximum contribution is phased out for taxpayers with modified adjusted gross incomes above these amounts. No contribution to a Coverdell Education Savings Account is allowed once the modified adjusted gross income is $110,000 for a single taxpayer or $220,000 for a joint return.

Roth IRAs-A Roth IRA allows you to contribute $5,500 a year in after-tax dollars in 2014. Contributions are subject to compensation and adjusted gross income limits. Catch-up contributions are also allowed for those age 50 or older. Contributions to a Roth IRA grow tax deferred and are available on a first-in/first-out basis (meaning you get your own contributions back first, tax-free). Earnings are potentially income tax-free if the Roth IRA is held for more than five taxable years and distributions are made after age 59½, death, disability, or first-time home purchase ($10,000 lifetime limit). Other distributions of earnings are taxable and subject to a 10% tax penalty unless an exception applies, such as qualifying education expenses. Consult your tax advisor regarding your particular situation.

College Prepayment Plans-With these plans, you can contribute funds to a specific college to prepay your child's costs at that college. Certainly, the idea of paying for future college costs has merit, yet this type of plan does have some limitations. For example, your child may not want to go to that particular college, or he or she may not get accepted by that school for academic reasons.

529 Plans-Named after Section 529 of the federal tax code, these plans have been instituted by an increasing number of states. While plans vary from state to state, essentially they all offer the ability to set aside funds for qualified higher-education expenses on a tax-deferred basis. Qualified distributions from a Section 529 plan are excluded from gross income under current tax law. There may be one drawback to 529 plans-you may have no control over how your money is invested.

With regard to Section 529 Plans (used for college funding purposes), investors should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. More information about municipal securities is available in the issuer's statement. The official statement should be read carefully before investing.


It is possible to lose money by investing in securities

Earnings on withdrawals from Section 529 Plans not used for qualified expenses are subject to income taxes at the distributee's rate, plus a 10% federal income tax penalty. State tax treatment of Section 529 Plans varies. Out-of-state residents may not have the same state tax benefits as those plans offered to in-state residents. You should consider, before investing, whether you or your designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 college savings plan.

UGMA/UTMA-The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) accounts are very similar and vary mainly in the types of assets that can be transferred to them. They provide a simple and inexpensive way to make a gift or bequest to a minor. UTMAs are not available in all states. UGMAs and UTMAs allow you to invest money on behalf of your child until he or she reaches the age of majority in your state. If assets are used before the child reaches majority age, they must be used for the child's support, education, and maintenance. Potentially, tax savings with UGMAs and UTMAs can be considerable as compared to structuring an account in your name. However, assets transferred into UGMAs and UTMAs become property of the child, and as a result when the child reaches the age of majority, he or she can use the money to buy a convertible, ski the Alps, or do any number of things that have nothing to do with higher education. In addition, UGMAs and UTMAs may affect your child's ability to receive financial aid. Revisions in the kiddie tax provisions of the tax law, which subject unearned income of the child to the parent's top tax rate, have limited the ability to shift income to a child to reduce the tax impacts.

Trusts-This approach enables parents to set aside money for their children with the assurance that it will be used exactly as the parent wishes. Establishing a trust requires the services of an attorney, an accountant, and a trust specialist.

Mutual Funds-Mutual funds offer a variety of investment choices, professional management, and may have low minimums. In addition to offering long-term opportunities, they are also liquid-shares can be bought and redeemed at any time. Of course, when you are investing in mutual funds, there is no guarantee that a fund's investment objective will be met, and you should understand that the principal value of a mutual fund investment will fluctuate and may be worth more or less than your original purchase price. Past performance is not a guarantee of future results. You may select from a broad family of funds available through Prudential for your college funding or other financial needs.

Investors should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. The prospectus, and, if available, the summary prospectus, contains this information as well as other important information about the fund. Contact your financial professional for a prospectus and, if available, the summary prospectus should be read carefully before investing. It is possible to lose money by investing in securities.

Certificates of Deposit (CDs)-Conservative investors have long looked to bank certificates of deposit for competitive interest and the safety of FDIC insurance. These accounts pay a specific rate for a specific period of time. Early withdrawals are usually penalized.

Annuities-Depending on your situation and your age, a long-term investment vehicle such as an annuity may be an appropriate product to help prepare for your child's college funding. Money placed in an annuity can earn interest on a tax-deferred basis until withdrawn. Keep in mind that withdrawals from an annuity are subject to ordinary federal income tax and are considered as coming first from taxable gain, then return of contributions for income tax purposes. Withdrawals may be subject to contractual surrender charges and the taxable portion of the withdrawal may be subject to a 10% federal income tax penalty if taken before age 59½.

Any guarantees are subject to the claims-paying ability of the issuing company. Variable annuities have fees and expenses, including mortality expense and administrative fees, with an additional fee related to the professional investment options. The fees will vary depending on the underlying annuity and investment options selected.

Variable annuities are long-term investment vehicles designed for retirement purposes. Investors should consider the contract and the underlying portfolios' investment objectives, risks, charges and expenses carefully before investing. The contract prospectus and the underlying portfolio prospectus, and if available the summary prospectus, contain information relating to investment objectives, risks, and charges and expenses as well as other important information. Contact you financial professional for the prospectuses. You should read the prospectuses, and if available the summary prospectus, carefully before investing. It is possible to lose money when investing in securities.

Life Insurance-Life insurance provides a death benefit-a valuable safety net to provide money for your family if you die prematurely.

Student Loans-Borrowing is a popular way to pay for college. An assortment of loans is available from colleges, banks, civic institutions, and the government. Of course, college loans have to be paid back with interest. Ten years is the usual time allotted for paying back a college loan after graduation.

Work/Study Programs-Many college students hold part-time jobs to help pay for college expenses. Unfortunately, money earned by a college student usually cannot make a big dent in the total four-year cost. Often a college student works to earn extra spending money, not to pay for tuition.

Financial Aid-Grants and scholarships play a vital role in a college's ability to attract students. Without financial aid, many students could not afford to attend college. The problem with financial aid is that it is not too dependable. There is no guarantee that a privately funded grant or scholarship will continue from year to year.

Personal Resources-Without having to liquidate your entire savings, investments, or other family resources, will you be able to write out five-digit checks each year for four years when your child is ready to begin college?