With the price of a college education in the U.S. consistently rising, it’s never been more important to start planning ahead. By getting an early start with a 529 College Savings Plan, you can help your child or grandchild prepare for rising tuition costs.
A 529 savings plan is a valuable education savings tool because it offers flexible, tax-deferred ways to save. 529 plans also offer many other benefits when compared to other savings vehicles, such as:
- States may allow contribution deductions from state income taxes.
- Earnings are free from federal taxes if used for qualified higher education expenses.
- In most states, earnings are free from state taxes if used for qualified higher education expenses.
- You – rather than your child – remain in control of the funds.
- Generous contribution limits exist, regardless of income level.
- You choose the investment strategy that is right for you and your student.
- Your child may choose any accredited college, university or vocational school.
- The account may be transferred to another family member.
- Contributions are typically excluded from your taxable estate and may not be subject to gift taxes.
However, there are some considerations to keep in mind:
- Earnings are taxed and subject to 10% penalty when withdrawn for uses other than qualified higher education expenses.
- The portfolio allocations may only be changed once per year or upon a change in beneficiary.
While 529 plans are specifically designed for college funding, there are other alternatives that could help cover higher education expenses. We recommend that you work with a financial advisor to review your options and select a plan that works best for your family’s needs. Call 1-888-518-7878, or stop by your local banking center to speak with one of our financial advisors today.
As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.
Securities offered through Raymond James Financial Services, Inc., member FINRA SIPC, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. First Mid Bank & Trust and First Mid Wealth Management are not registered broker/dealers, and are independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc.
