Like the benefits of a 401(k) or an IRA? Check out the 529 plan - Ahwatukee Foothills News: Money

default avatar
Welcome to the site! Login or Signup below.
|
||
Logout|My Dashboard

Like the benefits of a 401(k) or an IRA? Check out the 529 plan

Print
Font Size:
Default font size
Larger font size

Related Stories

Posted: Tuesday, November 27, 2012 2:49 pm

If you have young children, the end of another school year means you are now one year closer to the day when you send them to college — and one year closer to dealing with the high costs of higher education. However, you still have time to save and invest — and one of the best investment choices you can make is a Section 529 college savings plan.

In fact, a 529 plan contains, in just one account, some of the key advantages found in other attractive investment vehicles, such as a 401(k) or IRA. Consider the following:

• Tax-advantaged earnings. Roth IRA earnings accumulate tax free and are distributed tax free, provided the account is at least 5 years old and the account owner doesn’t start taking withdrawals until at least age 59 1/2. Similarly, a 529 plan’s earnings accumulate tax free and are distributed tax free, provided they are used for qualified higher education expenses (keep in mind, though, that 529 plan distributions not used for qualified expenses may be subject to federal and state income tax and a 10 percent penalty). Furthermore, your 529 plan contributions may be deductible from your state taxes. However, 529 plans vary, so be sure to check with your tax advisor.

• High contribution limits. For 2012, you can put up to $16,500 into a 401(k) plan, or $22,000 if you’re 50 or older. If you have an IRA, you can contribute up to $5,000 in 2012, or $6,000 if you’re 50 or older. The lifetime contribution limits for 529 plans may be more generous.

While the limits vary by state, many plans allow contributions in excess of $200,000, according to the U.S. Securities and Exchange Commission. Contributions to 529 plans are considered gifts; therefore, the $ 13,000 gift limit should be considered.

• Asset allocation. One key to being a successful investor is choosing the mix of investments — such as stocks, bonds and government securities — that are appropriate for your risk tolerance and time horizon. A professional financial advisor can help you create a suitable asset allocation for your 401(k), IRA or other investment accounts. Most 529 plans also offer an asset allocation strategy, typically based on the age of the child or the number of years until college enrollment.

For example, if your child is younger, your plan might start off with a higher percentage of aggressive investments in order to maximize your growth potential. As your child gets closer to college, the plan may take a more conservative approach to help reduce the effects of volatility before you start tapping into the plan.

Clearly, a 529 plan has much in common with popular investment vehicles, but it has other characteristics of which you’ll want to be aware. For one thing, the financial aid impact: assets in a 529 plan are considered an asset of the account owner, usually the parent. Federal financial aid formulas generally expect parents to use a smaller percentage of their assets for college funding.

Consequently, you’ll want to explore all aspects of any 529 plan, possibly in consultation with your financial and tax advisors, before taking action. But don’t wait too long — your children will move from day care to dormitories in what seems like a blink of an eye.

• This article was written by Edward Jones for Cyndi Newburn, an Edward Jones financial advisor in Ahwatukee Foothills. Reach her at (480) 460-1149.

More about

More about

More about

  • Discuss

Arizona Department of Public Safety investigating deadly crash on US 93 near Kingman

KINGMAN, AZ - Troopers are investigating a deadly crash on US 93 between Kingman and Las Vegas, NV on Sunday. The Arizona Department of Public…

Published: July 24, 2016 - 5:54 pm @ http://www.abc15.com/news/region-northern-az/other…

#ClintonNation: This is why Americans are voting for Hillary Clinton

Many supporters of the candidate who’ll be America’s first female presidential nominee don’t care that she’s a woman any more than they care h…

Published: July 24, 2016 - 4:19 pm @ http://www.usatoday.com/story/news/politics/electi…

Buy Low, Sell Never: Why Not Just Buy the Entire Coal Industry?

Published on by YES! Magazine Coal left in the ground is an investment in the climate, as well as the future of families in rural communities …

Published: July 24, 2016 - 4:15 pm @ http://www.commondreams.org/views/2016/07/24/buy-l…

700 open positions expected at job fair, other Valley companies hiring

Coast-to-Coast Career Fairs Coast-to-Coast Career Fairs is holding a job fair on Monday, July 25 at the Holiday Inn & Suites Phoenix Airpo…

Published: July 24, 2016 - 3:53 pm @ http://www.abc15.com/money/700-open-positions-expe…

Tim Kaine the Urbanist

Senator Tim Kaine of Virginia will be scrutinized for all sorts of things in the coming days, for his positions on gun control, abortion, and …

Published: July 24, 2016 - 3:48 pm @ http://www.citylab.com/politics/2016/07/tim-kaine-…

CW's Comic-Con block reveals who's in the pod on 'Supergirl' and teases a new 'Legion of Doom'

The CW, which has the most impressive TV block of comic book fodder, unleashed back-to-back-to-back-to-back panels late Saturday at Comic-Con …

Published: July 24, 2016 - 3:17 pm @ http://www.latimes.com/entertainment/herocomplex/l…

WNBA President Lauds Activism, Wishes It Was Kept off Court

WNBA President Lisa Borders applauds the league's players for taking a stance on social issues. She just wishes the activism was kept off the …

Published: July 24, 2016 - 2:18 pm @ http://abcnews.go.com/Sports/wireStory/wnba-presid…

Arizona Geology: Small quake felt in Arizona, New Mexico; aftershock to 2014 Duncan earthquake?

A magntiude 3.0 earthquake struck on the Arizona-New Mexico border just before 7 am this morning, and residents in both states report feeling …

Published: July 24, 2016 - 2:22 pm @ http://arizonageology.blogspot.com/2016/07/small-q…

WNBA Withdraws Fines Against Protesting Players

The WNBA is withdrawing all fines against its teams and players that showed support for the Black Lives Matter Movement. WNBA President Lisa B…

Published: July 24, 2016 - 1:48 pm @ http://www.vibe.com/2016/07/wnba-withdraws-fines/

Abbot Urges Monks Against Protest as China Razes Buddhist Academy

Print Re-election of Exiled PM Spurs Hope for Renewed Tibet Talks Tibetan Schoolboy Who Set Himself Alight Dies EXCLUSIVE: China Damming Lhasa…

Published: July 24, 2016 - 11:51 am @ http://www.voanews.com/content/abbot-urges-monks-a…

Facebook

ahwatukee.com on Facebook

Twitter

ahwatukee.com on Twitter

RSS

Subscribe to ahwatukee.com via RSS

RSS Feeds

Spacer4px

Most Popular

Online poll

Loading…