Happy 529 Day!Submitted by Washington Wealth Advisors | Falls Church and Ashburn, VA on May 19th, 2016
by Todd Youngdahl, CFP®
As a university graduate myself, it is no surprise that I value higher education. However, statistics show that having a college education has an even greater impact on a person’s financial life now than it did 20 years ago when I proudly wore the blue and gold of West Virginia University.
The Importance Of A Bachelor’s Degree
A 2014 Pew Research Center study among Millennials shows that those with a Bachelor’s degree earned on average $45,500, while those with only a high school diploma earned a mere $28,000. Only holding a high school diploma made someone almost four times more likely to be living in poverty than a college graduate (5.8% vs. 21.8%) and more than three times more likely to be unemployed (3.8% vs. 12.2%).1
As a father, these numbers are frightening when I think about my kids’ future. I want to do everything in my power to help my four children succeed in life. It’s obvious that one of the best things for them is to get a college education.
If a Bachelor’s degree is such an important key to my children’s future, what can I do to help them get there? I can encourage academics and teach them to value education. I can help them with their schoolwork and choosing college preparatory courses. And one of the most important things I can do is to save money to help pay their way.
For the 2015-2016 school year, the average cost of tuition and fees was $32,405 for a private university, $9,410 for state residents at public universities, and $23,893 for out-of-state residents attending public universities. With these kinds of costs, a part-time or summer job just isn’t enough to pay the tuition bill.
529 College Savings Plan
One excellent way to save for college costs is with a 529 plan, and today, on 5/29, it just so happens to be National 529 Awareness Day. A 529 plan is a tax-advantaged savings plan sponsored by individual states. If you have children or other family members interested in furthering their education, you need to understand the benefits of these plans.
Tax Free Earnings
You do not have to pay taxes on earnings in a 529 as long as it is used for qualifying higher education costs. There are no federal taxes due and most states do not tax the earnings.
State Tax Deductions
Most states also offer additional state tax deductions for contributions made to their own state’s plan. As 529 plans are state-sponsored, you would need to check with your own particular state to see what specific tax advantages they offer. Here in Virginia, taxpayers may deduct up to $4,000 per account per year.
Anyone Can Contribute
Contributing to a 529 plan is not a privilege only for the parents of the beneficiary. Anyone can contribute towards the costs of higher education; grandparents, other family members, or friends.
Parents Retain Control Of Funds
There is no need to worry about your teenager mishandling the funds because you, the parent, remain in control of the assets. The child that you are saving the money for is the named beneficiary of the account, but you are still the owner. They cannot bypass you to access the money.
Setting Up A 529 Plan
If you think a 529 plan might be a good idea for you and your family, Washington Wealth Advisors are here to help. We can explain the 529 plan options and help you decide which is best for your individual college planning needs.
Managing Your Account
Once you have a 529 plan set up, it is important that you have an experienced professional managing the investments in your account. The investment allocation should line up with the age of your child and the investment risk should be gradually reduced as the child gets closer to college.
Future Millionaires Bootcamp
If college seems far off on the horizon and you want to start preparing your kids for a strong financial life today, we have a solution! Our “Future Millionaires Bootcamp” is a summer camp for rising 1st-4th graders and middle schoolers. It will take place June 15-17 from 9am-3:30pm each day at Washington Wealth Advisor’s One Loudoun office. Take advantage of our special WWA client rate of only $150 (the cost is $295 for non-clients) and reserve your child’s spot today by emailing Alex at email@example.com. For more information, call our office at 703.584.2700 or email firstname.lastname@example.org today.
About Washington Wealth Advisors
Washington Wealth Advisors is an independent registered investment advisory firm serving high net worth families and small businesses. We focus on holistic financial planning and comprehensive investment management. Leveraging our core strengths of unbiased, active investment management together with a detailed annual financial planning capability, we serve your comprehensive investment and financial planning needs.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Washington Wealth Advisors, LLC), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Washington Wealth Advisors, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Washington Wealth Advisors, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Washington Wealth Advisors, LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request. Please Note: Washington Wealth Advisors, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Washington Wealth Advisors, LLC’s web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.