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Tag: Education Planning

529 Plans Rethinking the Possibilities

529 Plans: Rethinking the Possibilities

Posted on by Steve LaFrance

529 plans are no longer solely reserved for college tuition. Today, these versatile accounts offer a broader spectrum of possibilities beyond saving for college, covering expenses like vocational schools and K-12 education. With their tax advantages and adaptability to diverse educational paths, 529 plans emerge as a strategic solution for families seeking flexibility and foresight in securing their children’s educational future. In this blog, we are rethinking the possibilities of 529 plans to explore their full potential and delving into how you can leverage these accounts to invest in your child’s future at every stage of their education journey.

529 Plans for College Tuition

Traditionally, 529 plans have been used to save for college tuition and related expenses. These accounts offer tax-deferred growth and tax-free withdrawals when funds are used for qualified higher education expenses. By contributing to a 529 plan, parents can build a dedicated fund to cover the cost of tuition, room and board, books, and other college-related expenses. Anyone can contribute to 529 plans, allowing family and friends to contribute to your child’s future education.

K-12 Tuition

In recent years, the scope of 529 plans has expanded to include K-12 education expenses. Families can now use a 529 plan to pay for up to $10,000 in tuition at elementary, middle, and high schools, including private and religious institutions. This flexibility allows parents to start saving for their child’s education from an early age and provides additional options for educational choices beyond the traditional public school system. 

Vocational Schools

Another exciting development in the possibilities of 529 plans is the ability to use funds for vocational schools and career training programs. If your child is interested in pursuing a trade or obtaining specialized certifications, a 529 plan can help cover the cost of tuition, fees, and supplies. This opens up new opportunities for students who may not have considered traditional four-year college programs, allowing them to pursue career paths aligned with their interests and goals. Eligible vocational schools, including many technical colleges, cosmetology schools, culinary schools, and more can be found using the Federal School Code Lookup Tool.

Apprenticeship Programs

529 plans can also be used to support apprenticeship programs that are certified and registered with the U.S. Department of Labor’s National Apprenticeships Act, providing financial assistance for on-the-job training and educational coursework. Apprenticeships offer a valuable alternative to traditional education pathways, allowing individuals to earn, while they learn and gain practical skills in a specific trade or industry. By using funds from a 529 plan, apprentices can offset the cost of program fees, books, supplies, equipment, and other related expenses, making these opportunities more accessible to aspiring professionals. The Department of Labor provides a search tool to determine whether your apprenticeship is eligible for 529 plan funds. 

As 529 Day approaches, it’s time to rethink the possibilities of 529 plans and explore the various ways you can use them to invest in your child’s education journey. Contact the Blakely Financial office today to learn how we can help you maximize the benefits of 529 plans and support your child’s goals every step of the way. 

 

The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Investing in Your Graduate’s Future: Planting Seeds for Long-Term Success

Investing in Your Graduate’s Future: Planting Seeds for Long-Term Success

Posted on by Robert Blakely

Graduation is right around the corner! It’s an exciting time to celebrate your child’s accomplishments and look ahead to their future. As a parent, you play a crucial role in setting them up for success, and one of the best ways to do so is by investing in their future. There are countless ways to sow the seeds for long-term financial security and prosperity. In this blog, we are delving into ways you can invest in your graduate’s future journey today, so they can watch the returns flourish in years to come.

Roth IRA Contributions

Consider starting a Roth IRA for your child if they’ve earned income. A Roth IRA offers tax-free growth and withdrawals in retirement, providing a valuable tool for building financial security over the long term. By making contributions to a Roth IRA early on in your child’s life, you can leverage the power of compounding growth and set them on the path to a comfortable retirement. While Roth IRAs can also be used for educational expenses, in order to withdraw money without being charged taxes or penalties, you must be over 59 ½ years old and the account must be at least five years old.

529 College Savings Plan

Investing in a 529 college savings plan is an excellent option to support your child’s educational goals. These plans offer tax-free growth and withdrawals for qualified education expenses, making them a tax-efficient way to save for college. Parents are not the only people eligible to contribute, allowing family and friends to give a lasting gift to the beneficiary’s future. 

Whether your child plans to attend a traditional four-year college or university or pursue vocational training, a 529 plan can help ease the financial burden of higher education and provide valuable opportunities for their future. If your child receives a scholarship or decides against further eligible education, 529 savings plans offer the flexibility to change the beneficiary to avoid paying taxes and fees on unused savings.

Custodial Accounts (UTMA/UGMA)

Opening a custodial account, such as a Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA), allows you to invest in stocks, bonds, or mutual funds on behalf of your child. These accounts are a great investment option because they offer flexibility and control, allowing you to manage the assets until your child reaches adulthood (at 18 or 21, depending on the state). Introducing your child to the world of investing early on can help them develop valuable financial literacy skills and set them up for financial success in the years to come. 

Additionally, the funds can be used for the minor’s benefit before they take control of the account, including to help pay for college! Earnings are taxed at the minor’s tax rate, subject to kiddie tax rules. Before pursuing custodial accounts, talk to a financial professional to confirm which tax rules apply and how to best manage the funds. 

Financial Literacy Education

Investing in your child’s financial education is perhaps one of the most valuable investments you can make. Providing access to resources and courses on financial literacy from a young age can equip your child with the knowledge and skills necessary to manage and grow their finances effectively. From budgeting and saving to investing and retirement planning, a strong foundation in financial literacy sets the stage for a lifetime of financial success. 

As graduation season approaches, now is the perfect time to start investing in your graduate’s future. Regardless of the investment options you choose, every investment you make lays the groundwork for their long-term success. By contributing to your child’s journey to financial literacy and prosperity today, you can help create a bright and prosperous future for your graduate tomorrow. If you need assistance getting started, contact Blakely Financial today. Our team is here to help you discover the best investment options and work towards a secure financial future for you and your family. 

The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securing Your Future: Tips for a Successful College Planning Journey

Securing Your Future: Tips for a Successful College Planning Journey

Posted on by Emily Promise

Education expenses represent a significant financial commitment that accompanies us throughout our lives. Whether you’re considering having children in the future or you have teens nearing college age, we are here to equip you with essential knowledge and guidance for success in education planning.

Plan Based on Career Development

Work with your children to create a plan based on career development. When it comes to selecting a college, it is crucial to consider schools with programs and styles that align with future goals and aspirations. While small details are important, keep your eyes on the big picture: future success! Research the schools your children are considering and be sure to explore the degree programs each school offers to ensure they are properly equipped to help develop the skills and knowledge needed. The right college can make all the difference! 

Private vs Public Universities

When selecting a school, it is important to understand the details of the school and program. Each college or university offers a different price level dependent on many factors including program length, region/state, and type of educational institution. 

One of the most significant differences will be whether the school is public or private. Public colleges are mainly government-funded. They tend to have a wider selection of programs, more research opportunities, and a larger student body. Private colleges rely heavily on tuition, fees, donations, and endowments for funding and can be either for-profit or non-profit organizations. They often have more money available for grants and scholarships in addition to federal financial aid. 

The following are the estimated average costs of a full year of college at private and public colleges (via LendingTree):

  • Community college (public, in-state): $4,864
  • Community college (public, out-of-state): $8,622
  • Private community college: $15,460
  • Public two-year (in-district): $17,580
  • Public four-year (in-state): $25,290
  • Public four-year (out-of-state): $40,940
  • Private four-year: $50,900

College Savings Plan

A college savings plan is a crucial piece of the college planning puzzle and the foundation of any successful college financing plan. Think of your savings as a down payment on the total cost of college, similar to a down payment on a large purchase like a car or a home. 

Only 33% of families use a college savings plan to save for their child’s education. Whether you’re a new parent or already have children nearing their college years, it’s never too early or late to start saving to give them the best opportunities for success. Setting aside money over a long period of time takes discipline and even sacrifice, but can yield surprisingly positive results when done regularly. Work with a trusted financial advisor to help you navigate the process and create a plan tailored to your own goals and budget.

Financial Aid

Financial aid is a broad term for money used to help pay for college. It can include loans, grants, scholarships, and work-study funds. Ideally, you want to get the most from grants and scholarships to therefore have the least amount of loans possible. 

Colleges are the largest source of grant aid, with annual awards based on both need and merit. The federal government has two central grants, the Pell Grant, and the Supplemental Educational Opportunity Grant, which are reserved for those with high financial need. The federal government’s main contribution to financial aid is student loans, both Direct Subsidized and Direct Unsubsidized, which are available to all students regardless of their financial needs. 

Many colleges will have a net price calculator available on their website which can be used to estimate how much grant aid a student will receive from the school based on their financial and academic information. Use this to compare your estimated out-of-pocket cost at several schools and factor affordability into your college planning decisions. 

College is a significant investment, and understanding the financial aspects from college funding to school selection is crucial. The Blakely Financial team is here to help. Contact us today to get your college planning journey started.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Benefits of a 529 Savings Plan for Education

Benefits of a 529 Savings Plan for Education

Posted on by Robert Blakely

As the cost of education in the United States continues to rise, it’s becoming more and more important for parents to plan ahead. Fortunately, a 529 savings plan offers a solution to help alleviate the financial burden of education. The 529 savings plan is designed to help families save for education expenses by providing tax benefits and flexible investment options. 

What is a 529 plan?

A 529 plan, named after section 529 of the federal tax code, is a way to save for college in a tax-advantaged way. Plans are offered by states, and you can choose to participate in any state’s plan. It’s important to compare benefits to pick which plan best suits your needs.

There are two types of 529 plans—savings plans and prepaid tuition plans. 

  • With a 529 college savings plan, your investments grow in an individual investment account (tax-free).
  • With a 529 prepaid plan, you lock in a tuition payment at the current rates. The amount then goes into a general fund (rather than an individual investment account).

Between these two plan types, 592 savings plans are more common, as they have notable benefits. 

Tax-free Growth and Withdrawals

A 529 savings plan works similarly to a Roth 401(k) or Roth IRA. You select the investment option you want, deposit money, and your funds build over time in the account. Your investment grows on a tax-free basis. Money can also be withdrawn tax-free if used to pay for qualified higher education expenses.

Anyone Can Contribute

According to Education Data Initiative, Americans on average aim to save $55,342 for their child’s college expenses. With a 529 savings plan, a parent isn’t the only one who can contribute. Any friend or family member can make gift contributions to a beneficiary’s account. For birthdays and holidays, loved ones can make a lasting impact on the beneficiary’s future, cutting down on future student loans. The funds can be used to cover the beneficiary’s education costs, which are more than just tuition; these also cover textbooks, room and board, and other academic expenses. 

529 Savings Plans Can Be Used for More Than College Costs

Besides college expenses, the funds can also cover expenses for K-12 education. You can apply $10,000 per year toward private elementary or secondary school tuition expenses.

Flexibility to Change the Beneficiary

If your child chooses not to attend college or receives a scholarship, all is not lost. You can change the beneficiary to any other qualifying family member. This option helps families avoid paying taxes and fees on unused funds.  

A Little Goes a Long Way 

Small amounts truly add up over time and make a significant difference. Outstanding U.S. student loan debt reached $1.7 trillion at the end of 2020, according to the Federal Reserve. A 529 savings plan allows you to make a considerable dent in college costs, even if you start while the child is in high school. It is never too late—every penny counts.

The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
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