5 Perks of a 529 Plan
College has become one seriously expensive endeavor. Did you know the cost of attending college has gone up 260% in the past 30 years? What was once affordable now seems like a daunting expense. However, saving for college can be something you can do before, during, and after school. Why? The perks of a 529 plan of course. A 529 plan is a tax-advantaged account that encourages individuals to save for future education costs. Here's why a 529 plan can help you no matter what stage of life you are in:
1. It is Age Agnostic
Think 529 plans are only for kids? Think again. 529 plans can be established at any age and funded at any stage of life. You can use a 529 plan to finance your education now or in the future from a qualified college or trade school.
2. it's tax-advantaged
Why would you contribute to a 529 plan if you already have the money in the bank? To use its tax benefits. Many states allow you to receive a tax deduction for contributing to a 529 plan and if it is used for qualified expenses, you can withdraw those funds tax-free. A pretty good deal! In Missouri, you only need to keep your funds in a 529 plan for 10 days and can still receive the tax deduction. Check with your state to see your tax advantages.
3. You can choose any state
Do you like a 529 plan from another state? Choose that. You do not need to choose the 529 plan associated with the state in which you live however, you may miss out on your state's tax advantage if you choose a different 529 plan. Different states have different providers so if you think another company or investment is the right option for you, feel free to take advantage of that.
4. It isn't just for college
Do you want to send your children to private elementary and high school? Use a 529 plan. Starting in 2018, 529 plans can now be applied to elementary and high school tuition costs. Families can use up to $10,000 tax-free to pay for K-12 tuition. However, this does not apply to homeschooling expenses. To see your qualified expenses, research your state.
5. you can start one for future children
Want a 529 plan for kids you do not have yet? Simply start a 529 plan if your name. Once you have children, you can assign them as your beneficiary. It's that easy. This way, you can use compounding and time to your advantage creating more money in the account rather than just 18 years if you started when your child was born. A true win, win for all parties.
If you still don't think that 529 plans are for you, I will try to convince you one last time. Look at all of these qualified expenses for 529 plans:
starting a second career in retirement
certificates for your current job
creative designations like cosmetology or graphic design
and if you're really nice you can gift it to any one of these family members without incurring a tax penalty:
Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them
Brother, sister, stepbrother, or stepsister.
Father or mother or ancestor of either.
Stepfather or stepmother.
Son or daughter of a brother or sister.
Brother or sister of father or mother.
Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
The spouse of any individual listed above.