Financial Planning

Saving for College: 529 College Savings Plan

Saving for College: 529 College Savings Plan

Financial Planning

Planning for college is becoming increasingly important with higher education tuition on the rise and with the national student loan debt recently breaking 1.5 trillion dollars1. Many parents and grandparents are thinking about how they can help the next generation pay for college. One option is the 529 college savings plan.

A 529 college savings account is a state-sponsored investment account with tax benefits to incentivize saving for future college expenses. The contributions to a 529 college savings plan grow tax deferred and the earnings are not taxed as long as they are used for qualifying education expenses. Qualified education expenses may include tuition and fees, books, necessary software, internet access, and housing costs while attending school. This applies to community college, undergraduate, graduate, and trade schools. Additionally, under the Tax Cuts and Jobs Act of 2017, up to $10,000 from a 529 plan can be used for private, public, or religious elementary or secondary school tuition per year.

It is important to note that if the funds withdrawn are not used for qualifying education expenses, the gains will be subject to ordinary income tax plus an additional 10% penalty.

One 529 plan can have multiple beneficiaries; however, it is important to note that only one beneficiary can use the funds at a time. For this reason, it is a best practice for each student to have his or her own 529 plan.

A 529 plan can be funded through annual gifts from family members. In 2019, the gifting exclusion limit is $15,000 per person per beneficiary. 529 plans also offer an election which allows you to gift up to $75,000 up front and have your contribution treated as if you had made it over a five year period for gift-tax purposes.

While there isn’t an annual contribution limit to 529 plans, most states do have a total account limit. This varies by state, so to see your state plan and limits click here.

When considering opening and funding 529 plans, be sure to first consult with your CPA and financial planning team.

Sources:
1 https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#3e3d6654133f

Important Disclosure Information: The information contained within this blog is for informational purposes only and is not intended to provide specific advice or recommendations. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Schultz Financial Group Incorporated), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Schultz Financial Group Incorporated. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Schultz Financial Group Incorporated is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Schultz Financial Group Incorporated’s current written disclosure statement discussing our advisory services and fees is available for review upon request. Please Note: Schultz Financial Group Incorporated does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Schultz Financial Group Incorporated’s web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Where you want to go in life is up to you. How to help you get there is up to us.

Contact us today to start your journey…

Contact

Schultz Financial Group Inc.
10765 Double R Blvd. Suite 200
Reno, NV 89521
Phone: (775) 850-5620
Fax: (775) 850-5639
Email: info@sfginc.com

Where you want to go in life is up to you. How to help you get there is up to us.

Contact us today to start your journey…

Contact

Schultz Financial Group Inc.
10765 Double R Blvd. Suite 200
Reno, NV 89521
Phone: (775) 850-5620
Fax: (775) 850-5639
Email: info@sfginc.com

 

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