Reunited and It Feels So Good (and so does saving for college)
Since Sarah called me out on song references in her last post, I thought I would stick with the theme. I could remember the name of the song “Reunited,” but I couldn’t remember the artists. In my defense, the song was released in 1978, and I was only one-year old. Google quickly informed me that the artists were Peaches & Herb, and you can hear the somewhat-long version by clicking here.
This week, we are reuniting with our family friends who moved to Florida about a year and a half ago. We have stayed in touch and have been taking turns visiting each other. Visiting the beautiful Santa Rosa Beach on Florida’s gulf coast is a pretty nice option for us, but Tropical Storm Alberto has put a bit of a damper (pun intended!) on our outdoor activities. Either way, it’s always fun to hang out with friends.
The above picture shows our three kids and their three kids during a rare (for this week) sunny day. As usual, Coleman is the lone boy, but he is a pretty good sport! Because of what I do for a living, it got me thinking about 529 college savings plans and the recent rules changes that have come about as part of the new tax reform bill. Before I explain some of the highlights of 529 plans, I want to stress to parents that you should take care of your retirement plan before considering 529 plans. There are ways to pay for college through government loan programs, grants, and other strategies. However, there is no way to borrow for retirement!
529 college savings plans have become a very popular choice for college savers. They offer a lot of flexibility, and they provide tax-free growth up until the funds are used. The new tax reform bill now allows for up to $10,000 per year to be used for school expenses before college (private, public or religious elementary and secondary schools).
In a recent article by Kathryn Flynn of www.savingforcollege.com, she raises 6 common misconceptions that people have about college savings plans. They are summarized below:
- You do not have to use the 529 plan offered by your state of residence
- If your child does not go to college, you will not lose the money you have saved in your 529 plan
- You do not have to apply 529 plan savings toward colleges in the state where the plan is based
- If your child gets a scholarship, you will not lose the money you have saved in a 529 plan
- Savings in a 529 plan are considered when determining financial aid eligibility
- If a parent is the owner, and a child the beneficiary, the child cannot withdraw from the plan without parental permission
I will not go into all of the details of a 529 plan, but it is certainly worth considering as a college savings vehicle. Other than a ROTH IRA, it’s the only way to get true tax-free growth once funds are withdrawn and used properly. Even if you don’t live in Virginia, www.virginia529.com has some great resources and information that goes over most (if not all) of the options for savers.
Finally, next time you reunite with family (or maybe good friends!), it might be appropriate to mention you have a plan established. Grandparents and others can contribute to the plans directly, and they don’t have to set one up on their own. It can provide an excellent option for a gift vs. another toy or video game!