Starting to put aside money in a 529 plan when children are very young is a wonderful way to push yourself to save over an extended period of time, with some added benefits. Your kids get the advantage of having more funds to draw on for college, and you get an investment that grows tax-free. It’s a good deal for everyone reports the Green Bay Press Gazette’s recent article, “Benefits of 529 college savings plans keep giving,”.
529 plan contributions help you save more money because your investments grow tax deferred, while they’re invested in the plan. You can select your investments or use age-based options that change, as the beneficiary gets closer to college age. The distributions are tax-free if they’re used for qualified education expenses.
Grandparents are also able to create 529 accounts to benefit their grandchildren. If your grandchild doesn’t need the funds for school, you’re allowed to transfer the beneficiary designation to another grandchild or family member.
There are also estate planning benefits to opening a 529 plan. The annual gift tax exclusion is $15,000 for a single person. You could gift $75,000 for a single filer and $150,000 for couples.
New parents may find it hard to imagine their little babies as college students, but those years fly by. Before you know it, you’re packing up the car to take them to their first year at college. Be prepared for this time and start by saving in a 529 account soon after they’re born and invite other family members to also participate.
Note, also with tax reform, these 529 plans can also be used to fund tuition of privates schools grades K-12. A 529 is great option for your family in supporting your child(ren).
If you do not have children yet, but are planning too, you can also open a 529 account before your child is born, states an article from USA, “Kick Off College Savings Before a Child Is Born”. You would open the account in your or your spouse’s name and being making contributions. Once your child is born and has a social security number you can switch the beneficiary from either yourself or your spouse to the child.
Saving early, especially with rising education costs, is the best way to make sure your child will have financial support for the education you wish for them to have.
To learn more about 529 planning or other estate planning topics, visit our website today and schedule your consultation!
Reference: Green Bay Press Gazette (July 13, 2018)“Benefits of 529 college savings plans keep giving”