529’s

     From the day a child is born, every family would love to plan and save for their child’s future. Paying for your child’s education can seem out of reach with college and trade school tuition constantly rising. Luckily, there is an investment plan called a 529 that can help make those big dreams become a reality!

     A section 529 plan is a savings plan designed to promote saving for your children’s college or trade school tuition.

     College savings plans allow the person who contributes to the account, the account holder, to save for their beneficiary, the future college or trade school student. The 529 account is tax deferred, meaning that the contribution into the 529 are not deductible, (a small portion is for the state of PA). Earnings grow tax free and will not be taxed when you take out money for college expenses. All earnings, income, and gains on the investment inside the 529 accounts are not subject to income tax or a 15% capital gain tax.

     A parent, grandparent, or family member can initiate a 529 for the child.  While the account is called a “college savings plan”, the plan does not exclusively cover colleges; but will cover trade school’s tuition, art schools, or a semester abroad, room and board costs, books, fees, and a computer. 

      One great aspect of a 529 is that the earnings are not subject to federal taxes, if, the withdrawals are used for college or trade school tuition and other college related expenses. If you withdraw from your 529 account and do not use the funds for college or trade school based expenses, you will be subject to income tax and an additional 10% federal tax penalty on your earnings. A 529 can impact federal financial aid for a student as well. When a student has a 529 plan, this usually greatly reduces the participation amount, if any, that will be awarded to a student with federal financial aid. As of 2006, assets held in either 529 plan will be counted as parental assets when filling out a student’s financial aid forms. Students with a carefully planned and funded 529 plan may not even have the need for financial aid, as their investments will work for funding their entire education.

     Speaking to a qualified investment advisor with a solid knowledge of 529’s is every parent, grandparent, aunt, uncle, or other family members safest decision.

An advisor would be able to guide you with proper planning to benefit your future college bound student!

 

 

   written by: ||cassandra hartmanoffice manager||