Saving for college Archives

Reading, Writing, and Education Planning

July 25, 2023 Tags: back to school, college, Saving for college, tuition Marisa Mullis

The earlier you start saving, the easier it will be to send your kids to college

The month of August is when many parents are preparing to send children back to school this fall. While the checklists grow and the kids soak in the last few minutes of summer break, it’s important to remember college planning and back-to-school shopping. While getting an education can be difficult at times, paying for it can feel like climbing up an unending hill. More and more adults are going back to school, so this doesn’t just apply to kids.

According to the U.S. Census, in the 40+ years since 1980, college costs have increased by 169% – while earnings for workers between the ages of 22 and 27 have increased by just 19%.

Rising Costs of College

Today, the average cost for college – which includes tuition, room and board, and supplies – is $54,800 for private colleges and $27,330 for public in-state colleges (that rises to $44,150 for public out-of-state students).

Planning ahead for your children’s education can alleviate the burden on your family when you or your student must write a check or take out an education loan.

College Savings Plans

College savings plans offer many great benefits. For example, some taxpayers are eligible for a state income tax credit of up to 20% of contributions to a 529 account, which can add up to thousands of dollar per year. With a 529 plan, you put away money that grows tax-free, as long as you use it on education.

These types of savings accounts are also very flexible. Just because a student has a 529 account set up in Kansas, doesn’t mean the assets cannot be used to attend a school in California or Texas, as long as the institution is eligible under the specific 529 rules.

Many plans allow for hundreds of thousands of dollars per beneficiary to be held in a 529 account, with few income or age restrictions.

Another great benefit of a 529 is the donor retains control of the account and makes the decision for when withdrawals are made and for what reason.

Talk to Your Financial Professional

It’s important to consult a financial professional or a 529 plan manager with specific questions regarding how each state’s plan works.

Back-to-school season is a great time to teach children and young adults about budgeting and giving priorities to certain purchases. While parents get ready for that time of the year where they make sure lunches are made and homework is completed, it’s wise to look ahead and begin, if they have not already, planning for their kids’ college education.

With rising tuition costs, the earlier you start planning and saving, the easier sending a child off to school can be.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

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 state benefits such as financial aid, scholarship funds, and protection from creditors 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.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by FMeX.

LPL Tracking # 1-05317563

Tips for Utilizing Your Grad’s 529 Plan

May 29, 2019 Tags: 529 plan, Higher education, Saving for college Jacob Sturgill

Graduation season is upon us and if you’ve got a newly minted (or soon-to-be minted) high school grad, you’re probably already thinking through this summer’s pre-college plans. With a fresh diploma in your grad’s hand and acceptance letters sign and sent, you’ve likely got a few questions about how the financial aspect of this new chapter is going to play out.

If you’ve saved for your child’s higher education through a 529 plan, it’s time to look into how to make the use of this money for your student’s college needs. Here are some ways to put grad’s 529 plan to good use.

Reserve 529 Plan Withdrawals for Higher Education Expenses

Qualified higher education expenses are the only ones for which you can use your student’s 529 plan withdrawals. These include many expenses through your student’s college or university, such as tuition, room and board, meal plans, and textbooks. Other school-related expenses, like tech for your grad to keep up with their studies, can qualify.

Expenses like travel to and from campus or dorm decor are not considered qualified expenses by the IRS and can incur a higher tax rate on your 529 withdrawals. In general, it’s best to stick with IRS recommendations for spending your 529 funds and consult your financial advisor with specific questions.

Encourage Your Grad to Keep Relevant Receipts

Since you’re probably not living on campus with your grad and may have a few hundred or thousand miles separating you from your student’s new address, it’s important that your college student is on the same page as you when it comes to allocating education expenses. Clue your student into the expenses that they can count under their 529 plan withdrawals and encourage them to keep relevant receipts for these expenses. With these in hand, your tax time records will be much easier to maintain.

Mind Your Dates

When taking withdrawals from your 529 plan, it’s important to keep your related expenses within the same tax year. If you take money out with plans to pay a future bill, you run the risk of overdrawing your account if you don’t make payments until the following tax year. Plan accordingly when scheduling your bill payments to avoid running into problems with next year’s withdrawals.

Consider Future Contributions

Just because your student is soon to start their college career, you don’t need to stop contributing to their 529 plan. In fact, some parents find that they can increase their college contributions after their student starts school since their household budgetary needs are lower with one less family member living at home.

Additionally, since many parents plan for their 529 plan around ballpark figures, some families prefer to add additional funds once they have specific figures based around their children’s actual higher education needs. Talk with your financial advisor to get the best idea of whether your 529 savings are enough to cover your student’s expenses.

If you’re looking to make the most of your existing 529 plan or are still a few years away from your children’s graduations and want to start saving, contact Puckett & Sturgill Financial Group to meet CERTIFIED FINANCIAL PLANNER™ Jacob Sturgill. Jake will help you work through your family’s higher education funding needs.