May 29th is National College Savings Plan Awareness Day. This annual day celebrates the importance of preparing for future college expenses and the advantages of 529 College Savings Plans. Did you know that an alarming 70% of students who graduated from college in 2013 left college with an average of $28,400 in debt per borrower1? It’s shocking how quickly tuition rates have risen and how expensive the price tag of a college degree has become. Planning for future expenses has become a crucial necessity. See: Shocking Trends in College Expenses and College Debt Necessitate Earlier Planning for Families
College Savings 529 accounts have been getting a lot of exposure nationally and are starting to get the positive recognition they deserve. 529 plans offer a simple, affordable way to save for rising higher education expenses. These investment accounts allow tax-deferred growth, high contribution limits, and unique ownership features. See: School “Daze”
Characteristics of 529 College Savings Accounts:
- Anyone, regardless of income, can open a 529 account to save for their dependents or even their own educational expenses.
- Individuals can contribute annually up to the federal gift-tax exclusion ($14,000 for 2015 or $28,000 if married) per beneficiary. Keep in mind these contributions are made with after tax dollars.
- Under a special election you can combine up to five years’ worth of contributions into one contribution of up to $70,000 ($140,000 for married couples).
- Anyone (i.e. family) can also contribute until the account value reaches $350,000.
- Money from a 529 plan can be used for tuition, fees, books, supplies, and equipment required to study at any accredited college, university, or vocational school here in the United States.
- The money can also be used for room and board, as long as the beneficiary is enrolled as at least a half-time student.
- A distribution from a 529 account that is not used for the above qualified educational expenses is subject to ordinary income tax and maybe an additional 10% distribution penalty on the gains unless other conditions are met.
- Accounts are transferable: unused amounts are able to transfer to other qualified members of the beneficiary’s family without incurring any tax penalty.
Do you know how much do you need to save to send your child to college? Will your children need to take out student loans? See: Student Loan repayment and Forgiveness Programs
May 29th is recognized as ‘National 529 College Savings Day’ and we invite you to celebrate with us the importance of setting aside money for higher education. A little preparation to put money aside today could mean a lower financial burden for your children down the road and greater freedom for those of the next generation to pursue their own financial goals.
Do you have a child attending college this fall? Do you have questions about saving for future college expenses and how that fits into your overall financial picture? Contact us today and schedule a consultation. We, at Paragon Financial Advisors, are happy to have a more in-depth conversation with you about your personal circumstances.