Back to Blog
Massachusetts education savings planner7/26/2023 ![]() ![]() Plans that are owned by others, such as grandparents, don’t have to be noted initially, but the student will have to report any money they use from those accounts as their unearned income, which counts at much higher rate.Īnd what if you have money left over? “If your kid doesn’t go to college or gets a full-ride scholarship, let the money stay in the account and grow tax free,” Lax says. ![]() There’s also no expiration date or required withdrawals from 529 plans, like there are with most retirement accounts.Īn important note is that you’ll have to report all your savings in parent-owned plans on financial aid forms as a parental asset. You can contribute large sums to the plans, because states impose lifetime caps, rather than annual ones. These invest in a mix of stocks and bonds that gradually pull back on riskier holdings as your child’s college start date approaches. Age-based portfolios are popular in 529s. What you’ll see is similar to your investment options in a 401(k). Once you open a 529 and deposit money, you pick your investments from a slate of stock and bond mutual funds. You don’t have to be a resident to invest in a particular state’s plan, but you may get a special tax break for using the 529 plan tied to your state (more on that later). Schwab manages Kansas’ plan and Fidelity manages plans for Arizona, Connecticut, Delaware, New Hampshire and Massachusetts. You can open a 529 through Vanguard, for example, offered on behalf of the state of Nevada. The plans are sponsored by state governments, some in partnership with retail financial firms. How a 529 plan worksĥ29 plans let parents, grandparents and even students themselves invest in the stock market to build up a fund for education expenses. “But the 529 may be more flexible than you think.” “Hands down the most common concern I hear parents say when we talk about the 529 plans is hesitancy towards funding something that is so limited or specific,” says Autumn Lax, an Austin, Texas-based financial planner at Drucker Wealth. According to a survey from financial services firm Edward Jones, fewer than half of American adults know how 529 plans work. One reason is that many people don’t know about 529s. Still, that’s a drop in the bucket compared to the $37 trillion Americans have in retirement plans. ![]()
0 Comments
Read More
Leave a Reply. |