Close
Close

Client Login

Close

5 Reasons Why You Need a 529 Account

By
Matt Meline

, CFP®

Founder and CEO

Wednesday, June 22, 2022

A 529 plan is an investment account where the funds are designed to pay for your students’ education. As stated in Part 1 of this series, 529s can cover qualified education expenses. Here are 5 reasons you should consider opening a 529 account for your student.

 

1. Tax Benefits

>Earnings within the account grow federally tax free and there is no tax penalty if the funds are used to pay for college expenses.

>Earnings in the account do not have to be reported on your tax return.

>The state of Iowa incentivizes owners of 529plans by granting them a state tax deduction when they invest.

 

2. Flexibility

>Your 529 account can pay for more than just tuition. Other qualified expenses include room and board, books and supplies, fees, computers and software, and requirements for enrollment. The plans can now also fund graduate school, tech school, and up to $10,000 worth of student loans.

>529s are valid for both U.S. and international universities.

>If your beneficiary doesn’t finish college, the plan doesn’t expire. It can pay for your beneficiary’s school at a later time. The account can also be transferred to a new beneficiary who attends college if the original beneficiary does not attend school.

 

3. You are in Control of Account

>The individual who starts the plan has full control for the lifetime of the account. You, the owner, decides who the beneficiary is and how the money is invested in the account. You also decide how much money comes out of the account, when the money is removed from the account, and what educational expenses the money in the account pays for.

 

4. Minimal Impact of Financial Aid Ability

>When your family’s EFC, or estimated family contribution, is calculated to pay for college, a 529 account is considered an asset. In the formula for EFC calculation, parental assets are weighted at 5.64%. This is very small compared to other factors in the equation, so a healthy 529 account may have minimal influence on your EFC.

 

For more information regarding EFC please visit: https://www.prairiefirewealth.com/post/expected-family-contribution-de-mystified-part-1

 

5. Low Maintenance

>A 529 plan is designed to be simple. After meeting with a financial advisor to determine a direction for the account, the owner can set the account to have automatic investments from a bank account or a deposit from their payroll. After starting an account, your involvement with the plan is minimal, yet the earnings still grow!

 

Please check out more tips at www.pfwplanning.com/category/college-planning

Want to learn more about how PrairieFire can help? Our community enjoys free resources to help get their financial house in order.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Schedule a Call

Privacy Policy | Terms of Use | Disclosure

© 2021 PrairieFire Wealth Planning. All rights reserved.

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., a SEC Registered Investment Advisor. PrairieFire Wealth Planning is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.