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529 Plans: How Can They Help You?

529 Plans: How Can They Help You?

May 28, 2017

Picture this – your son or daughter comes home with an acceptance letter from the college of their dreams. Only one thing could make that moment sweeter – the security of knowing that no matter where they are accepted or what financial aid they receive, you have done your part in ensuring they have the resources to afford the college of choice.

Even if you don’t have children or grandchildren, keep reading! This information may still apply to you! You can establish a plan for your favorite niece, nephew or, with some plans, yourself. If you really wanted to, you could even establish a plan for your hairdresser’s son’s best friend’s third cousin twice removed. ;-)

So where to begin? How to prepare? There are many resources out there outlining steps to become financially ready, but it can all be very overwhelming. Children grow too fast and college costs continue to increase. The time to start planning and saving is now, because proper planning and saving can put the cost of any college within your reach.

A 529 plan is a popular option for families saving for a child’s college education, and for good reason. Although the plans differ from state to state, they are all exempt from federal income tax, and that can give a real bottom-line boost to your college fund. Do not assume you are not in a position to use a 529 plan. Unlike most other tax-advantaged programs, 529 plans are open to everyone, regardless of income level or age of children or grandchildren – as stated before, you don’t even have to have children or grandchildren yourself.

A 529 plan is a state-operated investment plan that gives families a federal tax free way to save money for college. It is officially known as a qualified tuition program, but commonly referred to as a “529 plan” after the section of the IRS code that provides the plan’s special tax breaks.

The basic terms of 529 plans are:
• Earnings and withdrawals are exempt from federal taxes, as long as they go toward paying college costs.
• Earnings are subject to a penalty if funds are withdrawn for purposes other than education
• State taxes are waived in some states for residents, deductions on contributions are allowed in others.
• High maximum contribution limits are allowed – sometimes up to $375,000 per beneficiary
• Contributions are considered completed gifts and are excluded from estates, which makes the plans attractive to grandparents, who can change the beneficiaries to other grandchildren as funds are needed.

Qualified education expenses from a 529 plan include the following costs at just about any accredited post-secondary institution in the country, including graduate schools:
• Tuition
• Fees
• Books
• Supplies

In addition, room and board expenses can qualify (subject to limits) if the student is attending college on at least a half-time basis.

Yes, college is expensive, and that’s why you can’t afford to put off saving until tomorrow. Education costs are NOT going down, and scholarships are getting harder and harder to come by. You can make a difference in a child’s life with regard to their education choices, and Lynn would like to assist you in this effort by helping you understand your financial choices and options. Please contact our office at (863) 295-9895 so Lynn can start helping you plan for your child’s or grandchild’s future.

PS: I especially like 529 Plans because two of my grandchildren were born on 5-29! =)

*Securities offered through H.D. Vest Investment ServicesSM, Member: SIPC, Advisory services offered through H.D. Vest Advisory ServicesSM,
*Lynco Financial & Tax Services, Inc. is not a registered broker/dealer or independent investment advisory firm.
*Subject to certain restrictions. By investing in a plan outside your state residence, you may lose available state tax benefits. 529 plans are subject to enrollment, maintenance, administration/management fees & expenses. Make sure you understand your state tax laws to get the most from your plan. If you make a withdrawal for any other reason, the earnings portion of the withdrawal will be subject to both states and federal income tax & a 10% federal tax penalty. As with any investment, it’s important to fully consider the plan’s objectives, risks, charges and expenses before investing.