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

New Billboard From ‘Actual Muslims’ Crops Up In Arizona

“Hey ISIS, you suck!” the sign reads, using a popular acronym for the Islamic State. The blunt billboard, signed by “#ActualMuslims,” was erec…

Published: August 25, 2016 - 1:41 pm @ http://www.theblaze.com/stories/2016/08/24/new-bil…

If You Aren’t Secretary of State, It’s Actually Really Smart to Run Your Own Email Server

For years, I’ve been trying to convince people that there is value in having an email server in your closet. But few seemed to really get it, …

Published: August 25, 2016 - 1:11 pm @ http://www.slate.com/articles/technology/future_te…

''I Didn't Serve, I Was Used'': How Veterans Are Losing the War at Home

font size decrease font size increase font size Print A friend of mine, a Vietnam vet, told me about a veteran of the Iraq War who, when some …

Published: August 25, 2016 - 12:49 pm @ http://www.truth-out.org/news/item/37368-i-didn-t-…

Counting Bites For Weight Loss

advertisement Find more information on Dr. Weil and integrative medicine. DrWeil.com The premiere resource for in-depth, timely, trustworthy i…

Published: August 25, 2016 - 12:40 pm @ http://www.drweilblog.com/home/2016/8/25/counting-…

Roaring Nights at the L.A. Zoo

June 24, July 29, August 26 & September 16 7–11 p.m. Must be 18+ to attend $25 per person (GLAZA* members $22) Purchase Tickets *GLAZA Mem…

Published: August 25, 2016 - 12:39 pm @ http://www.lazoo.org/roaringnights/

On Centennial, Honoring the Legacy of National Parks for Veterans

This week, we celebrate 100 years since President Woodrow Wilson signed the law establishing the National Park Service, a historic moment for …

Published: August 25, 2016 - 12:16 pm @ https://medium.com/@RepRubenGallego/on-centennial-…

Splash pads are the new public pools

By the third day of the heat dome, the city is a skillet of scorching pavement. Seeking relief, you follow the shrieks of children echoing acr…

Published: August 25, 2016 - 12:14 pm @ http://www.curbed.com/2016/8/25/12613140/summer-sw…

Our greatest NCAA Football game dynasty stories

The annual release of the Madden NFL video game is, for some, a holiday. But for diehard college football video gamers, it’s a somber reminder…

Published: August 25, 2016 - 12:13 pm @ http://www.sbnation.com/college-football/2016/8/24…

Phoenix serial street shooter update: Top Arizona law enforcement to address case at 1PM

PHOENIX - Arizona's top law enforcement officials are gathering Thursday to address the latest efforts in the ongoing search for a serial shoo…

Published: August 25, 2016 - 12:09 pm @ http://www.abc15.com/news/region-phoenix-metro/wes…

The New York Times - Timeline

See more of The New York Times by logging into FacebookMessage this Page, learn about upcoming events and more. If you don't have a Facebook a…

Published: August 25, 2016 - 11:49 am @ https://www.facebook.com/nytimes/posts/10150883291…

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…