(Back To) School Savings - Knowledge on 529 Plans

September means the end of summer, seniors on college tours and little ones, including our daughter, starting kindergarten. Our baby is 5, wait she’s 5?!

Seems like yesterday whispering Bowie’s “Changes” as a lullaby, in 12 years she’s touring colleges and dreaming of possibilities. Parents want the best their kids can achieve, let’s discuss ways to prepare, build and say “yes”.

Several options to save for benefit of a child, let’s discuss the most popular, 529 Plans.

What are 529 Plans? Tax-advantaged account designed to save for qualified education costs. They are sponsored by states, state agencies, or educational institutions and authorized by Internal Revenue Code’s Section 529.

5 Key Benefits

1. Earnings not federally taxed to pay qualified education costs at eligible schools in U.S. or abroad.

2. Owner (i.e. Parent/Grandparent) maintains control over use of account for beneficiary (child).

3. No income limitations on person’s ability contribute nor number of contributors.

4. Owner may contribute up to $75,000 ($150,000 per married couple) per child in a single year without incurring gift taxes, talk to a tax planning professional to learn more.

5. Can choose almost any 529 plan in the country, regardless of state you live.

Are all 529’s the same? No, with choice comes decisions. Some states offer tax benefits to contributions, however important considerations should be given to contribution limits, fees, investments, direct versus investment advisor (latter tends to be more expensive and investment managers can differ) and 529 Plan versus prepaid 529 Tuition.

Changes in 2018 - The Tax Cuts and Jobs Act of 2017 expanded 529 Plans eligibility to pay for qualified educational expenses for K-12 - up to $10,000 per year per student.

Best Practice - For birthdays and holidays, relatives wanted Wish Lists for our girls. We evolved by also sending an invite through their 529 Plans to securely contribute as little as $25 with a note that we’d match dollar-for-dollar. Less toys, but more joy come college acceptances.  

Speak with your advisor, visit a plan’s website to enroll directly or utilize a resource like collegesavings.org to prepare, build and say “yes”.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Glenn Brown is an Ashland resident and owner of PlanDynamic, LLC, www.PlanDynamic.com. Glenn is a Certified Financial Planner™, Chartered Retirement Planning Counselor and fee-only fiduciary helping families and business owners build, evolve and sustain financial independence.

This article appeared in the September 2018 editions of Ashland Local Town Pages and Holliston Local Town Pages.

Please call me at (508) 834-7733 or directly schedule a meeting to learn more about college savings strategies and how to participate.

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