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5 Things to Know About 529 Plans

Core Facts

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Friday, April 5, 2019

The cost of education has been rising steadily for decades, and there’s no sign that this trend will subside. With higher education becoming more and more expensive, parents need to start preparing for the expenses of their children’s tomorrow, and there’s no better time to start investing for higher education needs than right now.

If you don’t plan ahead, it’s likely that you'll be part of the majority of American families who do not have a college savings plan in place.  According to a Sallie Mae study, only 39% percent of families have a plan to pay for college tuition. That means that the remaining 61% of families are left having to take out loans to cover the costs.

On average, families pay for college through a combination of resources. Savings, grants, scholarships, student loans, or personal loans.  A 529 College Savings plan is probably the most intelligent thing you could do in anticipation of the coming expenditure for tuition and other costs that go along with a college education.

Something to keep in mind is that you can view your savings as an investment in your child’s future. The New York Times released a study that showed Americans with four-year college degrees earned 98% more per hour than workers without degrees. 

In order to be ready when that day comes, it would be wise to start preparing today. Here are some things to know about 529 plans as you look over your options:

High contribution limits, no income restrictions

Plan contributions can be made up to a maximum balance which differs by state and/or plans – for all program accounts per beneficiary. Plus, there are no income restrictions on the account owner.

They’re not just for college

While funds from 529 plans can be used for qualified higher education expenses, including tuition, fees, room and board, books, computers, and other required materials, they can now also be used for similar expenses associated with public, private, or religious primary and secondary education.

Anyone can contribute

Any U.S. citizen – including relatives and friends – can contribute to a 529 plan for a selected beneficiary. Some grandparents might consider 529 plan contributions as birthday gifts.

They’re transferable

When you open a 529 plan, you are the “owner” of the account for the benefit of your selected beneficiary, such as your child, or other family members. Should the designated beneficiary not need financial assistance for college, it can be transferred to another.

Estate planning advantages

Especially important for grandparents or other relatives, contributions to a 529 plan account are excluded from the donor’s taxable estate for federal tax purposes (assuming the donor is not the beneficiary).



Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.

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Author: Sally Falkow

Categories: David Lerner Associates News


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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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