College Savings Month!

529 Plans

Article Courtesy of Nancy Harris, CMFC, CDFAPresident, LPL Financial Planner, New Foundation Wealth Group

College Savings Plans (aka 529 Plans) simplify and provide tax benefits for parents, grandparents, other family members and friends to save for children’s college AND retirement.Here are some of the main benefits:

• Annual gifting - You can gift up to the gift tax exclusion each year.

• Accelerated gifting and estate planning - You can accelerate your impact and accomplish some estate planning by gifting each beneficiary up to $180,000 as an individual or $360,000 per couple.

• Tax free earnings - Earnings are tax-deferred and tax-free when used for qualified education expenses. This may allow the account to grow faster through tax-free compounding.

• College and Roth IRA - Starting this year, Congress is allowing up to $35,000 in leftover savings in the college savings plan to roll over tax-free into Roth individual retirement accounts!

• The “grandparent loophole” - FAFSA has been revised in 2024, creating the so-called “grandparent loophole.” Grandparents can now use a 529 plan without affecting the student's financial aid eligibility. Previously, withdrawals could have reduced aid eligibility by up to 50 percent of the amount of the distribution – aka the “financial aid trap.”

If you would like to know more about how a college savings plan can benefit your family and loved ones, please visit our website at NewFoundatioinWG.com or contact us at 253.254.6005. Let’s invest in the next generation! 

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.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.