During these uncertain times, 529 plans may make more sense than ever
For many people, a 529 savings plan offers an opportunity to achieve an important life goal and improve overall financial health. As college and university administrators determine how higher education will look in the future (classes on campus, remote learning or a mix of both), the benefits of a 529 plan have never been more meaningful. Here are three benefits that are particularly important during these times ó especially as the cost of higher learning continues to rise.
1. Not only can 529 plan assets be used to pay for tuition and books, they can also pay for computers, internet access and other equipment. This will be especially important if remote learning continues indefinitely.
2. The recently passed Setting Every Community Up for Retirement Enhancement (SECURE) Act expanded qualified expenses to include registered apprenticeship programs1 and repayment of college debt.
3. Account owners have full control over 529 plan assets and can even be the beneficiary of their own account. This is a huge benefit for anyone looking to go back to school right now to advance their skills for the evolving work environment and new opportunities that may come with it.
Here’s the Study Guide
A 529 plan is a tax-advantaged savings plan designed to help pay for education. Originally limited to postsecondary education costs, it was expanded to cover K-12 education in 2017. The two major types of 529 plans are savings plans and prepaid tuition plans. Savings plans grow tax-deferred and withdrawals are federally tax-free if they’re used for qualified education expenses. Prepaid tuition plans allow the account owner to pay in advance for tuition at designated colleges and universities, locking in the cost at today’s rates.
Follow the Money
Distributions from a 529 plan can be used to cover a long list of qualified education expenses at qualified institutions. Here’s a summary:
· Tuition up to $10,000 per year per student
· Tuition and fees
· Books, supplies and equipment required for enrollment or attendance
· Room and board (on- or off-campus for students who are at least half time)
· Computer peripheral equipment, software and internet access if used primarily by the beneficiary
· Special needs services as required by beneficiaries in connection with enrollment or attendance
· Fees, books, supplies and equipment required for participation in a registered apprenticeship program1
Types of eligible institutions
· In-state or out-of-state colleges
· Public and private schools
· Vocational schools
· Technical and trade schools
· International higher education institutions
· Any public, private or religious elementary or secondary school
· Registered apprenticeship programs1
· Repayment of principal/interest on any qualified education loan up to a $10,000 lifetime limit for the designated beneficiary
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.1 Registered and certified with the U.S. Department of Labor.
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.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
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©2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.