Did you know May 29 is recognized as National 529 College Savings Plan Day?
College is a time when many young adults are out on their own for the first time. Between living in the dorms, choosing your classes, and meeting new people, college can be one of the most unforgettable experiences we go through in life. But, if we forget to save up for our children’s education, paying for it can quickly become a huge burden.
According to Student Loan Hero, “the average Class of 2016 graduate has $37,172 in student loan debt.” That’s enough to make some people cringe. The good news is, though, that 529 plans exist.
529 plans are tax-advantaged savings plans that are sponsored by states, state agencies, or educational institutions to encourage saving for college. There are two types of 529 plans – pre-paid tuition, and college savings plans. Here in Wisconsin we have college savings plans. These plans allow you to save up for qualified higher education expenses including tuition, room & board, mandatory fees, and books. It’s more than just another savings account, though! 529 plans aren’t subject to federal income tax, and in Wisconsin, “residents are allowed a subtraction from their state taxable income of up to $3,100 per beneficiary per year for their 2016 and 2017 tax returns.”
Keep in mind that the money you withdraw from your 529 must be used for qualified college expenses; otherwise those withdrawals will be subject to a tax penalty. Another thing to consider is that college savings plans are subject to market risk – as with any investment, it is possible your investment won’t make a profit, or that it could even decline in value. To help manage these risks there are flexible investment options ranging from conservative to aggressive.
Whether you’re a parent or grandparent of a future college student, we’d love to answer any questions you may have about college savings plans. Call me today for your free consultation!
Call 715-839-1006 for your FREE college savings plan consultation today!
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.