Margaret Is Trying to Decide Whether to Place Funds in a Qualified

question 51

Essay

Margaret is trying to decide whether to place funds in a qualified tuition program. Her son will be attending college in 4 years. She is in the 35% marginal tax bracket and she believes she can earn an 7% before tax return on alternative investments. Thus, $10,000 will accumulate to $11,948 (after-tax) in 4 years. Margaret expects tuition to increase at the rate of 5% each year to $12,155 in 4 years. Her son will be in the 15% marginal tax bracket in all relevant years. Given these assumptions, should Margaret participate in the qualified tuition program?

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Definitions:

Family Nutrition

The study and practice of planning and consuming a balanced diet to ensure optimal health and wellbeing for all family members, considering their diverse nutritional needs.

Community Resources

Various forms of support and assistance available within a community, such as libraries, healthcare facilities, and support groups.

Hospice

A care model aimed at providing comfort and support to terminally ill patients and their families.

Adolescent Mothers

Refers to young females, typically within the ages of 13 to 19, who have given birth.