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College Planning

Providing a college education for your children or grandchildren is likely to be one of the most rewarding financial goals you will ever pursue. However, planning is key. With costs rising many families are left wondering how they can afford a college education for their children.

529 College Savings Plan Overview

529 Savings Plans are totally changing how Americans are paying for college. They’re flexible, offer extensive control, and allow a high level of contributions. The IRS tax code provides for 529 educational tax plans as a way to save for education.

With the appropriate 529 Plan, careful planning and some discipline, you can address the goal of preparing and paying for your loved ones college education.

How a 529 Plan Works

As the “contributor,” you establish an account for the “beneficiary,” usually your child or grandchild, for saving anticipated college expenses. To establish this account, you may use the 529 Plan in your state of residence, if applicable, or you may use a 529 Plan from another state not having a residency requirement.

Funds in a 529 Savings Plan may be applied to the costs of tuition, fees, books, supplies, food, housing and equipment required for attendance at an “eligible educational institution.” Most accredited institutions of higher education in the U.S. and some foreign institutions would qualify as “eligible.” This includes most private colleges, public universities, graduate schools, two-year community colleges, and vocational-technical schools.

Features of a 529 Plan

  1. Earnings grow tax-deferred and remain tax-free* if used for qualified education expenses. Many states offer state tax deductions for residents. This should be taken into consideration along with other plan features and overall performance, when selecting a plan.
  2. Contributions of as much as $60,000 ($120,000 for a couple) for each beneficiary can be made in the first year and qualify for the annual gift tax exclusion, under a five year election. Contributions greater than the annual gift tax exclusion are treated as a gift to the named beneficiary made over a five year period.
  3. The contributor maintains control of the account, regardless of the age of the beneficiary, but assets leave your estate. Assets may be brought back into your estate if you later revoke the account or don’t live past the fourth year, when choosing the five-year election. However, federal income tax and a 10% penalty will be due on earnings removed from the plan.
  4. The contributor may change the beneficiary, providing the new beneficiary is a member of the family of the original beneficiary.
  5. There is no penalty for withdrawal of funds, if the designated beneficiary receives a scholarship, dies or becomes disabled.

Note however, some states have specific exemptions that do not adhere to the federal tax law. For example, some states do not permit the use of 529 Plan funds for certain educational expenses such as books, room and board, supplies and equipment.

To schedule a no-obligation appointment to discuss planning for your child's future, call or stop by any Northfield Bank branch.

* Non-qualified distributions of earnings will be subject to income tax and a 10% federal tax penalty.

Please carefully consider the investment objectives, risks, charges, and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer's official statement. You may obtain an official statement from the issuer or your financial advisor. Please read the official statement carefully before investing.

 

About INVEST Financial

Northfield Bank offers investment services through INVEST Financial Corporation. INVEST Financial Corporation is a leading broker-dealer working together with highly respected bank and independent Investment Professionals serving clients nationwide. INVEST Financial Corporation is affiliated with Jackson National Life Insurance Company — one of America’s largest life insurance companies.

INVEST FInancial Corporation offers an extensive range of powerful investment choices, including: Stocks & Bonds, Mutual Funds, Fixed & Variable Annuities, Retirement Planning for Individuals and Businesses and College Savings Plans.