Article

A Powerful Tool to Save for College

A Powerful Tool to Save for College

A 529 plan gives you the opportunity to take advantage of tax benefits, flexible contribution options, and potential investment growth as you save to ensure your child has access to quality education without burdening them with excessive student loans or compromising your own financial stability.

March 28, 2024
A Powerful Tool to Save for College
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

As the calendar flips closer to the month of May, a sense of excitement and anticipation fills the air for many high school seniors who are preparing to embark on their next journey: college. The month of May holds significant importance for students and their families, as it marks a critical juncture in the college planning process.

It also serves as a reminder of the paramount importance of saving for college, a task that should be taken seriously and initiated well in advance. The rising costs of higher education necessitate careful financial planning to assess one's savings strategy, explore available resources, and prioritize building a solid financial foundation for the future.

Saving for College

Saving for college is a vital financial goal for many families, considering the rising costs of higher education. It is never too early to start planning and setting aside funds to ensure that your child has access to quality education without burdening them with excessive student loans or compromising your own financial stability. One effective tool that can greatly assist in this endeavor is a 529 plan.

A 529 plan, named after Section 529 of the Internal Revenue Code in the United States, is a tax-advantaged savings plan designed specifically for educational expenses. It offers several benefits that make it an attractive option for parents and guardians seeking to save for their children's college education. 

Tax Advantages

First and foremost, a 529 plan provides tax advantages. While contributions to the plan are not deductible on your federal income tax return, the earnings within the plan grow tax-free. When you withdraw the funds for qualified educational expenses, such as tuition, fees, books, supplies, and even room and board, the earnings are not subject to federal income tax. This tax-free growth can significantly enhance your savings over time and provide you with more resources to cover college expenses.

Furthermore, many states offer additional tax benefits for residents who contribute to their state's 529 plan. These benefits can include deductions or credits on state income taxes, potentially reducing your overall tax liability. It's crucial to review the specific rules and regulations of your state's plan to take full advantage of these potential tax benefits.

Flexibility

Another advantage of a 529 plan is the flexibility it provides. You can typically open an account with a relatively small initial contribution and make regular contributions over time. Some plans even offer payroll deduction or automatic investment options, making it convenient to save consistently. Additionally, you have control over the investment options within the plan, allowing you to choose the level of risk and potential growth that aligns with your financial goals.

529 plans are also flexible in terms of the beneficiary. If the intended beneficiary decides not to pursue higher education or receives a scholarship, you can change the beneficiary to another qualifying family member without incurring penalties. This flexibility ensures that your savings can still be utilized for educational purposes within your family.

One notable aspect of 529 plans is that they can be used for qualified expenses at eligible colleges, universities, and vocational schools nationwide, as well as some institutions abroad. This flexibility allows your child to pursue their educational goals wherever they choose, without being restricted to specific institutions or locations.

Your Financial Advisor Can Help

Overall, a 529 plan provides a powerful means of saving for college and can alleviate the financial strain associated with higher education. By taking advantage of the tax benefits, flexible contribution options, and potential investment growth, you can build a substantial nest egg to support your child's educational aspirations. However, it is essential to carefully research and compare different plans, considering factors such as fees, investment options, and state-specific benefits, to select the plan that best suits your needs and financial situation.

Remember, the earlier you start saving, the more time your investments have to grow, compounding their potential value. So, don't delay.

Begin exploring your options and take the necessary steps to secure your child's educational future through a 529 plan.

Other content you may like

  • a Stronger Dollar Has Investing Implications

    A Stronger Dollar Has Investing Implications

    October 10, 2022
    World currency fluctuations mean more than calculating your travel costs. Exporters win or lose every time currency rates fluctuate, affecting corporations and your portfolio. Here’s a brief overview of how that may look in global markets, how a strong dollar may affect U.S. exports, and the pros and cons of international investing.
    Read this Article
  • Hubbard Baro Memorial Golf Tournament

    Honored to Support Our Central Valley Veterans

    November 22, 2021
    This “In Their Honor” golf tournament began in 2005 in commemoration of Corporal Jeremiah Baro and Lance Corporal Jared Hubbard who were killed in action in 2004, and then Nathan Hubbard who was killed in action in 2007. As our troops return home, many struggle with injuries and health conditions that make the challenges of life even more demanding. Our contribution to the local Veteran’s Affairs Medical Center helps them do their part to get these men and women the treatment and care they deserve, with hopes they too can live the American Dream.
    Read this Article
  • Presidential Election Momentum

    September 24, 2024
    Looking at average starts in U.S. Stocks in an election year, Student of the Market looks at historical data on how the best starts carry into the rest of the year. Big swings in interest rates are examined in bond returns and compared with money market funds. And stats to indicate a normalization in the yield curve.
    Read this Article
  • Podcast Highlight - Value vs Growth

    November 28, 2023
    David gives insight into the difference between being a value investor and investing in value as a style.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset