529 – A Holiday for… College Savings?
Happy 529 Day!
Happy National 529 College Savings Plan Day! Yes, there truly is a holiday for everything now… even college savings. But what exactly is a 529 College Savings Plan and why does it deserve a day of recognition?
A 529 plan is a savings plan that is designed to help families save for future college expenses.** [**Traditionally, 529 plans covered limited room and board costs. However, the Tax Cut and Jobs Act of 2017 now also allows 529 plans to cover qualifying expenses for private, public, and religious kindergarten through 12th grade.]
According to the U.S. Securities and Exchange Commission, “There are two types of 529 plans: prepaid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan” (“An Introduction to 529 Plans,” 2017). The 529 plan allows your money to grow free from federal taxes if it is used towards the cost of a higher education.** According to Virginia529, “Virginia taxpayers enjoy the additional benefit of a state income tax deduction on contributions to their Virginia529 accounts” (“Basics,” 2018). It truly is an excellent college savings plan, but not enough people know about it. According to CNBC, “Only 32 percent of people could correctly identify a 529 plan as an option for saving for college expenses” (Anderson, 2017). This is the reason why we are celebrating this holiday, to inform people about the resources that are available to them.
With over 44.2 million Americans facing student loan debt, it is necessary that we start talking more about college savings plans. According to Student Loan Hero, “Americans owe over $1.48 trillion in student debt” and this number is only growing (“A Look at the Shocking Student Loan Debt Statistics for 2018,” 2018). This is a scary statistic, but luckily, you can avoid being a part of it.
Start planning today and set up a 529 plan! The sooner you start, the more your savings will grow. We hope we got you thinking about your future.
Happy 529 Day!
Questions? Let’s take this conversation to a more personal level. Always confidentially. Contact us:
*Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Non-qualified withdrawals may result in federal income tax and a 10% federal tax penalty on earnings.
**Traditionally, 529 plans covered limited room and board costs. However, the Tax Cut and Jobs Act of 2017 now also allows 529 plans to cover qualifying expenses for private, public, and religious kindergarten through 12th grade.
Sources:
Anderson, Tom. “It’s 529 Day, and 68 Percent of People Don’t Know What a College Savings Plan Is.” CNBC, 29 May 2017, www.cnbc.com/2017/05/26/its-529-day-and-68-percent-of-people-dont-know-what-a-529-plan-is.html./
“Basics.” Virginia529 | 529 Plans to Help College Savers Dream, Save and Achieve | Virginia529, www.virginia529.com/new-savers/basics/.
“An Introduction to 529 Plans.” SEC.gov, 4 Dec. 2017, www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html.
“U.S. Student Loan Debt Statistics for 2018.” Student Loan Hero, Student Loan Hero, studentloanhero.com/student-loan-debt-statistics/.
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