May 29th is 529 Day!

Funding higher education - graduation

Higher education costs have historically grown much faster than the overall rate of inflation. Today, education may even cost more than a family home. Most families expect to pay off their house with a 20-30 year mortgage, so why would you think you could pay for an entire education in 4, or maybe 8 years?

A 529 Savings Plan may be the perfect solution to funding higher education.

9 Reasons to Fund a 529 Savings Plan

  • Tax-Free Growth: If you eventually use the funds for qualified education expenses, the growth in 529 Plans and the eventual distributions will be tax-free.
  • Start Early: Once a child has a Social Security Number, a 529 Plan may be established to potentially benefit from years of compounding returns.
  • Flexibility: 529 Plans may be used for both undergraduate and graduate/professional studies, community colleges, vocational schools, some foreign institutions, apprenticeship expenses, and even qualified K-12 tuition. In addition to tuition, qualified expenses may include fees, books, supplies, computer technology, and even certain room and board costs.
  • Investment Control: Hundreds of investment options are available to match each family’s time frame and risk tolerance.
  • State Tax Benefits: Many states offer state tax deductions or credits for contributions made to 529 Plans.
  • Estate Benefits: Those subject to estate tax may be able to distribute $18,000 ($36,000 for married couple filing jointly) per year free of federal gift and estate taxes to an unlimited number of beneficiaries while maintaining significant control over those assets.  In addition, a special provision in the tax code allows gifts of up to $90,000 ($180,000 for married couples filing jointly) in a single year to an unlimited number of beneficiaries. Note: restrictions apply to these super contributions.
  • Control: The account owner has full control to decide when and how much to withdraw, or even change the beneficiary to another eligible family member.
  • Unlimited Sources: Once a 529 Plan is established, family and friends may contribute, up to the annual limits, with no income restrictions on the benefactor.
  • Rollover Opportunity: Under limited circumstances, unused funds may be rolled into a Roth IRA.

Of course, it is always best to consult a tax advisor or Certified Financial Planner™ professional who knows your particular circumstances for guidance.