Some people don’t use, or aren’t aware of, what a 529 plan is — the 529 college savings plan is used to pay for higher education, which is anything above a high school diploma. If you, or your children plan on gaining a higher education, it may be beneficial to look into what a 529 can offer you. Some advantages of this plan are:
One of the main reasons to use a 529 plan is because of the tax breaks. The contributions to the 529 will not be tax deductible, but it will grow federal tax-free. Therefore, the more money that is contributed to a 529 savings plan, the more that can grow tax-free for a higher education. By investing into a 529 plan, you may be able to save a significant amount of tax dollars.
If a student applies for financial aid, and the 529 is not under the parent’s or student’s name, then the asset is not considered accountable — or responsible. For example, if the 529 plan is under a grandparent’s name, this does not need to be recorded for financial aid; rather, it can be used for the education, but will not deduct any of the financial aid the student may receive.
If the student does not use the 529 for their education, then the money can be repurposed. However, when withdrawing the money for anything other than education, there will be income tax. This is money that can be used for retirement or any other financial goal. Another option you have with a 529 is to give the 529 plan to another relative such as one of your siblings or children.
Here a Crystal Brook Advisors, we are Certified Financial Planners and Registered Investment Advisors. If you are interested in starting a 529 or would like to gain some advice from our experts, make sure you visit CrystalBrookAdvisors.com for your one hour free consultation. Remember, “live for today, and plan for tomorrow” because “we make financial planning crystal clear”.