529 Education Savings Plans

Plan ahead to cover college expenses    Any parent or grandparent will tell you that 18 years fly by when kids are growing. Once a child enters kindergarten, high school graduation arrives in a blink of an eye. To avoid sticker shock, or empty pockets, to cover ever-rising college costs, families are wise to plan ahead.

Save tax-free for further education costs 

Start early to save for college. From a child’s birth is not too soon. Anyone can open a state-sponsored 529 plan at any time for children, grandchildren, nieces or nephews, even non-related kids. When a parent, guardian, friend or relative starts a 529 account, the future student is the beneficiary. The adult in charge manages the investments, making all decisions. As with IRAs, account owners save on income taxes as 529 money grows to cover college bills.

Some folks worry that kids may forego further education, wasting their 529 money on cars, concerts, vacations or other fleeting adventures. That’s not likely, since the adult holding the account doesn’t have to release the funds. If a beneficiary does not continue his or her education, the account owner can change beneficiaries – or keep the account for himself, paying the 10 percent penalty on earnings to withdraw money that will not go toward college expenses.

529 earnings accumulate tax-free                                                                                                                                                                       

Money invested in a 529 plan accumulates tax-free. Withdrawals are penalty-free and federal income tax-free –     as long as the money is used at an eligible educational institution for qualified school expenses. IRS-qualified college expenses include tuition and fees, books, school supplies, including computer-related equipment. If a student enrolls in enough classes to attend college at least half time, room and board can also be covered.

Like IRAs and other investment plans regulated by the IRS, there are limits to the amount of money that can be put into a 529 plan annually, along with federal gift tax guidelines. Since each state’s 529 program varies a little, it’s wise to check out the rules with a financial advisor before opening an account. (You can set a first-time-free appointment to discuss 529 plans at aamllc.com).

Which questions are most often asked about 529 Education Savings Plans?

  • Do education savings plans affect a student’s financial aid?
  • Can a student use his or her 529 plan at out-of-state colleges?
  • Are students with 529 plans limited to certain types of colleges or universities?
  • Can 529 funds be used at private schools, foreign schools or vocational institutions?
  • Is a 529 Education Savings Plan the best way for us to save for college expenses?

Generally, 529 plans make sense, but with many variables to consider, parents, grandparents and others who want to help with college costs should talk to a financial advisor before opening an account.





To get answers to your questions on 529 Education Savings Plans, call Ron VanSurksum at 616-531-5220.  Manage Your Money . . . helpful financial facts provided for you by Advancd Asset Management LLC                           Follow our blog: aamllc.com                  Ronald Van Surksum, CFP                          4555 Wilson Ave SW – Suite 2               Grandville, MI 49418                      rvansurksum@aamllc.com                           Phone: (616) 531-5220                            Cell: (616) 450-8439

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