Let’s face it, planning for your family’s future is hard work. There are an unlimited number of variables in play, and even the most thought out plans can get thrown out the window. When it comes to saving for your child’s education, it is up to you to decide what is best. If you’re anything like the millions of new parents out there, you must be wondering where to begin. Save yourself the time and the headache of combing through all of your different options, and contact your financial advisor about a 529 savings plan. These plans offer tax and financial aid benefits, and when the time comes, ensures your child’s education is funded.
Not convinced? Here are some of the many benefits to enrolling in a 529 savings plan:
Everyone Qualifies for a 529 Savings Plan
The beauty of a 529 savings plan is that everyone is eligible to enroll—even some corporations. There are no age, income, or contribution limits; however, depending on the state, there are total contribution limits ranging from $250,000 to $500,000. A 529 savings plan can be opened when your children are very young, and can even be opened before they are born. This kind of early enrollment gives you plenty of time to grow your account, and help plan for an unpredictable future.
Cover Tuition Costs, and More
A 529 savings plan isn’t just for tuition expenses alone. You can spend your savings on any “qualified education expense.” This means you can use your funds to pay for books, supplies, room and board, computers, and more. The point of the savings plan is to cover the cost of education expenses, and any parent knows those expenses go far beyond the cost of college credits! Keep in mind that there are also expenses a 529 will not cover, such as transportation costs, cell phone plans, and student loan repayment. Staying aware of what is covered and what isn’t will help you get the most out of your plan.
Stay in Control of your Money
In most cases, the named 529 beneficiary (your child) has no legal right to the funds in your savings account. This gives you the peace of mind that the funds will be used for their intended purposes. Another added benefit of a 529 savings plan is that the donor (that’s you) can borrow against the account at any time, for any reason. If you do withdraw from this account, remember that those funds will accrue income tax, as well as an additional 10% penalty tax. These fees usually dissuade individuals from withdrawing funds, but it’s nice to know that they are there if you should need them.
Easy Tax Reporting
The money that you contribute to a 529 does not have to be reported on your federal return. You will never receive a 1099 form unless it is time to pay for college. What’s more, is that with recent 2018 legislation, deposits made up to $15,000 to your plan can qualify for gift tax exclusion, which serves to lower taxes on your entire estate.
Set it and Forget it
When you’re busy with everything that goes into raising a child (not to mention your own life), you don’t want to have to worry about saving more for their education. A 529 savings plan takes care of itself. Depending on the state, many 529’s allow for payroll deduction and automatic investments from your bank account. Investment management is outsourced to a third party company or by the state’s treasurer’s office, so you can save for your child’s education without lifting a finger.