Now that you have started a family or are a little ahead of the curve and are pondering the idea, "my kids are growing up so fast I think I need to start looking into 529 College education plan," This is for you!
What is a 529 plan & how do I get started?
A 529 plan is a way to start saving for your kid's education, it is also a tax-advantaged savings plan. There have been recent changes to the 529 plan that allows you to use the money to pay for tuition for private schools from kindergarten all the way through 12th grade. Your money grows tax-free! and you can take advantage of using it for tuition, books, and fees.
How much can I put into a 529 plan?
So far there is no limit stated as to how much you can put into your kid's education plan, these contributions are considered gifts for tax purposes. This 2018 year allows individuals to contribute up to $15,000 in a 529 plan for tax exclusion; for married couples, you two can contribute up to $30,000 per child without any tax consequences.
Okay so whats the catch? Fees? and expenses associated with these types of plans?
These types of accounts vary depending on where you start your 529 education plans, normally most of them have enrollment fees, maintenance fees, management fees, and assessment fees. Although this may deter you to approach this don't let this part scare you as these fees are found to be cheaper than mutual funds.
What can I use the money in a 529 education fund for?
This money has to be used for any educational purposes some examples are for elementary or secondary schools. You wil not have to worry about taxes and penalties.
How will this affect financial aid for my kids?
Bottom line, this depends on who owns the 529 account. If the dependent student or a parent uses it, on the FAFSA application it would be considered a parental asset on the application. If a grandparent or a friend owns the account this would not impact the students applying for receiving financial aid.
What if I start a 529 plan, but in the future, my kids decide not to pursue college?
Well if this is the case, it would be wise to keep the money there in case they change their mind and decide to go to college. You can also transfer your account to another qualifying family member without any penalties. Also consider this, even if your kids don't plan on going to college maybe when they have kids, your grandchildren could use your 529 education plan.
So what ever stage you are in life like all other life/family decisions you have to make at least you are considering and doing whats best for your families future. You have good intentions. It is sad to say that most people will finance two new vehicles, take elaborate vacations, or just fail to plan for their families future. But the smart ones do the small things that make a huge difference in their familes lives. This is just another part of an important element to consider when starting a family or if you have kids and are considering this at what ever stage in family life you are in it is never too late to get started.
Rene Gonzales
512.568.7203
[email protected]
www.primerica.com/renegonzales
License Number: 2265292