Recently, I just celebrated my son’s 1st birthday party. Like any new parent I am still wondering where the first year went. Although I do not remember my first birthday celebration, I can be confident that the gifts my son received far surpassed my gifts for my first couple of birthdays (this is where I give a shout out to all our family and friends). In addition to all the wonderful gifts, we also received several checks. Of course, the little man doesn’t appreciate those checks now (I promise you that mommy and daddy do), he will appreciate them when those checks are helping him attend college.
Introducing the 529 College Savings Plan
Many people (parents, soon to be parents, and grandparents) ask me where the best place nowadays to put money away for school. For me, the 529 College Savings Plan is an easy choice. Let me run down a few of the reasons that it made sense for us and could make sense for you, too.
We will always be in control.
With 529 plans the owner (could be parent, grandparent, aunt, uncle, etc..) is always in control of the money, unlike custodian accounts under the Uniform Transfers to Minors Act (UTMA). So when little one decides at 18 he wants to take his money and run, he can run but won’t get very far.
Tax Free Is Never a Bad Thing.
Like Roth IRA’s, the money that comes out of 529 plans will be tax free as long as used for “Qualified Higher Education Expenses”. These can include tuition, room and board, mandatory fees, required books and computers, etc.
Scholarship Provisions.
If our kid becomes the next Tom Brady like I expect him to be and receives a full ride to College USA of his choice, you are allowed to pull the scholarship dollar amount out of the 529 plan tax and penalty free.
Balance Transfer.
If the above mentioned occurs or of if school just is not in your kids future, you can always transfer it another child or even another family member.
No deadlines.
Your child does not have to use it before a certain age. So if they decide to go back and apply for an MBA or PHD, it still is good.
Thus far we have blessed with any money received has gone straight into the 529 account. But then the next question is, “How much do you save for College?” That will be soon to follow.
References: IRS Publication 970
Securities offered through LPL Financial, Member FINRA/SIPC
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