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Ask The Expert - August 2018

by Stacy Wise | Aug 29, 2018

529 College Savings Plan

What is a 529 plan and why should I start one?

Answer: A 529 college savings plan is a tax-advantaged investment plan designed to help families to save for a beneficiary’s (typically one’s child or grandchild) future higher education expenses. While commonly referred to as 529 plans, they are formally known as “Qualified Tuition Programs,” as defined in Section 529 of the Internal Revenue Code, and are administered by state agencies and organizations.

Savings in a 529 plan grow free from federal income tax, and withdrawals remain tax-free when used for qualified higher education expenses. Additionally, many states mirror the federal 529 plan tax advantages by offering state tax-deferred growth and tax-free withdrawals for qualified higher education expenses.

There are no required minimum contributions to the 529 plan, and a $350,000 total maximum is allowed. Account owners and non-account owners can contribute and claim a deduction. The 529 plan offers investment flexibility and choices.

Whether college is 5, 10, or even 17 years off, the future isn't that far away.  John Denny, Financial Consultant with MidAmerica Financial Services, is one of your resources, with insights to help you chart a course towards pursuing your goals. Call John at (309) 647-3880 to discuss your college savings strategy.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Non-qualified withdrawals may result in federal income tax and a 10% federal tax penalty on earnings.

Contact John Denny today to start the new school year with a college savings plan!

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