With George ShawGeorge is a Registered Representative with and offers insurance products and securities through Linsco/Private Ledger.
A recent sign on a retail establishment read: “If you think education is hard, try ignorance!”
Good humor and also good advice for both aspiring students as well as their parents. If you have a child (or grandchild) and you’re thinking about investing in his/her future education, here are a few things to consider with regard to 529 Savings Plans.
|Earnings free from federal taxes and, through 2010, withdrawals free from federal taxes if used for qualified higher education expenses.|
|Contributions of up to $11,000 a year ($22,000 for married couples) without gift-tax consequences. Or, under a special election, up to $55,000 ($110,000 for married couples) can be contributed at one time by accelerating five years’ worth of investments. However, no other contributions can be made for the next four years.|
|No income limits. Unlike a Coverdell Education Savings Account, people of all income levels can contribute to a 529 Account.|
|Investment mix may be changed once a year or whenever a new beneficiary is selected. As the beneficiary gets closer to college, you may want to revise your investment mix to fit your changing time horizon.|
|You maintain control of the assets and decide when the money will be spent.|
|The beneficiary can be anyone—a child, grandchild, a niece or nephew, a friend, or even the contributor. The beneficiary may also be changed without tax consequences to another member of the beneficiary’s family.|
|May be used for most higher education including college, graduate and post-graduate study, and technical training. Tuition, room and board, books, and certain other fees and expenses are all qualified higher education expenses at an eligible educational institution.|
|If you withdraw money for something other than qualified education expenses, you will owe federal income tax and may face a 10% federal tax penalty on earnings.|
|Under current tax law, the ability to withdraw money free from federal tax from a 529 College Savings Plan ends in 2010, but this may be extended.|
|529 Plan holdings could impact the beneficiary’s ability to qualify for grants and student loans.|
|Some states offer residents an incentive to invest in their state-sponsored 529 College Savings Plans. Be sure to consider how this contribution will affect your state tax bill.|
For more information on 529 Savings Plans, contact any member of PB Investment Services at Paducah Bank. The number to call is 575.6636.