The Importance of 529 Plans

Melissa N. Osika, MBA

With rising college cost, saving early and often is more important than ever.  This video covers some of the benefits of 529 college savings accounts.  

[TRANSCRIPT 3:39]

“Welcome to the world - This little bundle of Joy!” The last thing you're thinking of is 18 years from now when you may be sending this bundle of joy off to college. 

In 2018, the college board did a study and they called it the trends in college pricing projected cost of college for a four-year institution 2018 four years of school for a public university cost approximately $92,000;   A private institution cost approximately $209,000.  Fast forward 18 years later and a public institution is going to cost roughly $211,000 and a private institution is going to cost approximately $479,000. 

So let's talk about some of the benefits of a 529 - First we have tax benefits so the tax deferral on growth inside a 529 plan.  Also 529 plans allow for tax-free withdrawal for qualified expenses.  Also depending on your state, you may qualify for a state tax deduction or a state tax credit. For example, in the state of Illinois you get ten thousand dollars per individual or twenty thousand dollars for married couples. 

Another benefit of a 529 account is account control. The owner of the account controls the account, meaning they can make investment selections. They can change beneficiaries and they can also do withdrawals. 

A third benefit of a 529 plan is the investment options - So there are a plethora of investment options amongst the different plans for different states. 

The fourth benefit of a 529 plan is flexible contributions so 529 plans. Most plans have no account minimums and they also have no minimums for ongoing contributions. Also, they make it easy for friends and family to make those contributions.  

The last thing. Now your little bundle of joy is going off to school and what are the choices - Well these 529 plans can be used at most accredited colleges, trade schools and even graduate schools. 

What does this mean? Well investing in a college education, you're going to need a sizable sum of money in order to finance this long-term investment but starting a 529 plan can be helpful by offsetting some of the college costs early and you're going to do that by investing early and often.  

So if you have any questions, concerns or would like to start a 529 plan feel free to call us here at Herr Capital Management.  

Thanks for your time and have a great afternoon.

_{Potential investors of 529 plans may get more favorable tax benefits from 529 plans sponsored by their own state. Consult your tax professional for how 529 tax treatments and account fees would apply to your particular situation. To determine which college saving option is right for you, please consult your tax and accounting advisors. Neither APFS nor its affiliates or financial professionals provide tax, legal or accounting advice. Please carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information about municipal fund securities, please obtain an offering statement and read it carefully before you invest. Investments in 529 college savings plans are neither FDIC insured nor guaranteed and may lose value.  Non-qualified distributions are subject to income tax and a 10% penalty on the earnings portion of the distribution, some 529 plans offer limited investment choices, some 529 plans have high fees and 529 plans owned by a third-party can hurt financial aid eligibility.}