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Whether the child in your life is 13 years old, 10 months old, or due any day, it is never too soon to start planning. Thinking about the costs involved in a child’s education can be overwhelming, but the earlier you begin saving, the longer your money can work for you. Making prudent investment decisions can also make a big difference.
Although the obstacles may seem numerous, there are ways to begin saving for a college education. Today, education savings vehicles are plentiful and diverse, with a broad range of tax benefits and consequences, financial aid implications, contribution limits, and asset flexibility.
Named after Section 529 of the IRS tax code, A 529 plan is an investment plan operated by a state, designed to help families save for future college costs.
Some Key Advantages of a 529 Plan:
Once you decide on a plan, the assets are professionally managed either by the state treasurer’s office or by an outside investment company.
Saving for college can be daunting given consistently increasing tuition rates. The good news is you do not have to do it alone. Contact us to discuss education planning strategies that meet your specific goals!
Income Tax Advantages
Investment earnings in a 529 plan compound on a tax-deferred basis, and qualified withdrawals are federal tax free. Additionally, select states offer further state tax benefits. For example, account owners who are New York State taxpayers can deduct up to $5,000 in contributions on their state income tax return each year ($10,000 if married filing jointly) for investing in their 529 plan accounts sponsored by the State of New York.
Accessible and Flexible
529 college savings plans are available to everyone, with no income or state residency requirements, provided they have a Social Security number or Tax ID. As account owner, you can name a beneficiary of any age living in any state. It could be a child, grandchild, niece, nephew, friend, spouse, or another adult – even yourself.