College Savings – The 529 Plan

Paying for college may be harder than ever, but a 529 savings plan, can make saving for college easier than ever. Changes in the tax law make state 529 plans an attractive way to save for higher education with unique benefits to help you make the most of your college savings.

The state-sponsored plans provide shelter from federal and state income taxes and give grandparents a good way to chip in for their grandkids education. In fact, anyone can contribute to the account. 529’s let your savings grow tax-deferred and escape tax altogether if you use the money for qualified educational expenses, such as tuition, fees, books and room and board. If your child opts out on higher education, you can transfer the funds to another family member and preserve the tax benefits. If the savings go unused, you can withdraw the money yourself and pay income tax and a 10% penalty on the earnings. Unlike other education savings programs, 529’s let families participate regardless of income, and the states set a high ceiling on contributions.

Need to reduce the size of your estate? 529 plans also represent an opportunity to help the grandkids and move money out of your estate. You can put up to $15,000 annually into a 529 plan for each child (or $30,000 if your spouse joins in the gift) without incurring the federal gift tax. Or you can drop $75,000 ($150,000 per couple) into the account at one time and average the gift over five years.

Financial Aid concerns? Parents don’t have to worry that a 529 will seriously affect their financial-aid potential. The federal financial-aid formula assesses parent-owned accounts at 5.64%, a relatively painless hit compared with the 20% assessment on student savings.

Also, many states give the account owner full or partial state income tax deductions for their contributions to the state’s section 529 plans. Only Pennsylvania, Kansas, Minnesota, Missouri, Montana and Arizona provide for state tax parity, where contributions to any state plan are eligible for the state’s income tax deduction.

The ins and outs of 529 college savings plans can be confusing. To learn more about this type of savings vehicle, please contact us to discuss.

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 benefits 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.


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Wealth Accumulation Phase

Are you in the “Wealth Accumulation Phase” of your life?

At various stages of life, we are all faced with important investment and financial decisions. Making educated and informed decisions at each stage of your life can have a major impact on your income, your net financial worth and ultimately, on your standard of living.

The Accumulation Phase

Most hard working professionals do just that. They work hard and are focused on their work. If you find that you don’t have the time, the knowledge or the resources to manage and invest your wealth, then we can help. It’s never too late to implement a plan.

We will discuss your goals, your risk tolerance, plan for your child’s higher education, set up an asset allocation that fits you and your family and pre-plan your retirement needs.

Together, we will monitor this through the years and make the necessary changes as you get closer to the next phase, the “Wealth Preservation Phase” of your life.

Wealth Preservation Stage

How far away are you from retirement? Have you planned for this? Whether you are currently retired or planning to retire within the next 5 -10 years, we can help. This is what we call the “Wealth Preservation Stage” of your life. The preservation phase has a greater focus on effective risk management strategies and the preservation of wealth.

Need to rollover your 401-(k) plan or any other qualified plan to an IRA Account? Let’s sit down and discuss these benefits along with the overall risk you are taking on your current portfolios. The aim here is to preserve and grow financial assets so as to ensure that there is a sufficient income stream and a level of financial security that will meet both current and retirement living expenses.

Together, we will plan a prudent strategy to generate an income stream that fits you,
while maintaining an allocation towards growth, to hedge against inflation and preserve your principal.