Open a 529 College Saving Account...And Invest in Your Future

Who can argue that college is expensive?


And it’s no secret that the cost is growing by the year and that student loan debt is crazy-expensive.



Parents usually spend some time thinking (or rather worrying) about how to help their children afford college, that’s why I want to address the 529 college savings account.


Why is this a good idea?


Let’s find out!



What Is the 529 College Savings Account?


Congress created the 529 in 1996. It is a state-sponsored plan that allows you to save for education.


The 529 college savings account allows the savings to grow tax-free, as long as the money is used for educational expenses.


The gifting rules in the United States state in 2019 the limit was $15,000. An example is that each grandparent could potentially give their grandchild $15,000. That limit is for individuals gifting money.


The 529 allows each individual gifting a $75,000 limit in one year. However, a word of caution must be issued, if the individual gifts too much, they can be hit with federal gift taxes.

The point is, is that a 529 account can receive an exceptionally decent amount of money each year!


Setting-Up The 529 College Savings Account?


How does setting up a 529 college savings account work?


Any individual can set up an account for a beneficiary.


If you set up the account, that means you own it, even if the funds are meant for someone else’s education. You own the money and the account, and you can pull it out at any time, but be aware that there are consequences to withdrawing money.


What happens if your child doesn’t need the money?


  • You can pull out the money (you may have to pay taxes on the growth in the account plus a 10% penalty)

  • Change the beneficiary (the next child or relative)

  • You can use it for your own educational expenses


They are held with state-sponsored plans. Start looking at the distinctions made by the state where you live. Some states allow you to receive tax deductions for money into the account, while others don’t allow it. You don’t have to use only the state plan.


You can set up the account and fund it without any outside help. However, there are lots of tools to help you.


Some of the help with these accounts come with high front-end commissions. It’s important to look at the distribution of these accounts and work on a strategy.


If you get to this point, I strongly suggest that you seek out some professional advice.


Have You Heard of College Backer?


Do your children have tons of toys they don’t play with?


What if your collective family could give gifts that keep on giving?


Something that influences the future instead of cluttering up the present?


College Backer is a tool that you can utilize to set up a 529 college savings plan.


The 529 college savings account is the easiest way to save for college, but it can be really hard for the average parent to figure out.


College Backer makes it easy to get started. It takes five minutes, and three simple steps.

Once your account is set up, instead of ubiquitous birthday and Christmas gifts your family members can choose to put money into your child’s college fund.


The fund works with a personal link collegebacker.com/your child's name.


When your children leave for college, just remind them to send out thank-you cards to the family members who contributed to their education!


College Backer Recommendations

What are the criteria that College Backer uses to make recommendations?


  • Low-cost

  • No front-end commissions

  • Direct sold plans with a low-fee (no advisor-sold plans)


They mostly use Vanguard funds, which are passively invested. They start out more aggressive and then go to moderate over time.


On average, they start at 18 basis points, which is the cost of the investment, and it comes out of your account every year. It’s a great price point for a 529 plus the service and accessibility.

As for College Backer, themselves...they are 100% free!


Questions…


How do 529 accounts affect the ability to receive FAFSA?


You must be careful with accounts owned by parents because they count as parental assets. They can reduce the aid package by 5.64% of the account value.


An interesting fact: 529 accounts owned by grandparents are not counted as assets towards FAFSA. However, the withdrawals are counted as untaxed income on a FAFSA.

What else should I know?


Tax law changes in 2017, enabled you to use the 529 accounts for other expenses, such as K-12 education, adult educational retraining or technology required for education. The money can also be rolled into an ABLE (Achieving a Better Life Experience) account for the disabled.


You may want to seek professional help to navigate all the various techniques when dealing with 529 accounts.


(Haven't listened to Saving for College with a 529 is a No Brainer yet? The timing is really good right about now to do that!)


OK, quick check in!


How did you like this blog? If you've found it helpful and enlightening, please share your thoughts in the One Million Apples Facebook Community!


Or... if you find yourself in need of someone who can help you navigate your way through your financial plan, check me out at Wealth of Confidence!


I'd love to help you.

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