529 College Savings Pans

Disability Insurance
May 28, 2013

529 College Savings Pans

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Pave Your Own Path

How a 529 College Savings Plan Can Jumpstart Your Life After College

By Kevin Bayani

You often hear that you can’t put a price on a good college education. Certainly a college degree is essential today; without one career opportunities become increasingly difficult to secure, but it does come with a price tag. College expenses have risen year after year, and the amount of student loan debt has surpassed that of credit cards. Earning a bachelor’s degree in arts or science, and ideally a master’s, will make you more competitive and provide more opportunities to secure a higher paying job. Although this is an attractive path to pursue, you must be prepared to pay the costs after graduation.

Over the last ten years the cost of attending private and public four-year schools has risen 25{5fd922036a702b30f5daff64149008b19303c62e64f9f4821bb47f905d3512d8} and 45{5fd922036a702b30f5daff64149008b19303c62e64f9f4821bb47f905d3512d8} respectively. A 529 college savings plan can help parents and future graduates offset some of these costs. Under Section 529 of the Internal Revenue Code, these plans are investments that grow tax-free. Not only do they accumulate tax-free, any distributions used to pay for qualified educational expenses are not taxed either. These expenses include tuition, books, fees, and more.

The sooner you open a tax-advantaged plan the better. Some parents take advantage of the 529 savings as soon as their child is born. If you start while your child is young you can look forward to 15-20 years of tax-free growth. Saving $25 per month in a piggy bank will give you $5,400 in eighteen years. Over the same period, if you were to establish a 529 plan that averaged just 3{5fd922036a702b30f5daff64149008b19303c62e64f9f4821bb47f905d3512d8} per year you would have $7,166. That’s $1,766 you could have earned tax-free to put towards college costs. The investments into 529 plans are offered through mutual fund companies, and each company offers different fund selections that can be allocated to fit your objectives and risk tolerance.

Another benefits to 529’s is that they can be passed onto siblings. For example, if you opened a 529 for your son and he ends up getting a full scholarship or doesn’t attend college, the assets can be transferred, tax-free, to your daughter who may need the money.

The total amount of outstanding student loan debt is now over $1 trillion dollar, and according to American Student Assistance, the average amount of this debt per student was $26,600 at the end of 2012. Wouldn’t it be nice to start and finish college without the stress of loans or debt that could potentially jeopardize credit?

A 529 college savings plan is a way to pave an easier path for future college graduates. Being prepared and possibly walking out of college debt free will provide financial freedom and peace of mind for both parents and students.

Please contact us today to discuss your goals and make your path to securing a college degree much easier.

Kevin Bayani

Phone: 201-489-1118


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