Hey there – Cooper here.
Happy Friday.
I’m Cooper, a Tannery Company CPA and graduate of the University of Arkansas, class of 2019. Today, let’s dive into something that could make a difference in your child’s future—the 529 plan. In just 5 minutes, you’ll know how to make an impact.
Back-to-school season is in full swing, and as the school year kicks off, it’s the perfect time to ask yourself: Is it time to start planning for my child’s college education? If yes, here’s how to set them up for success with a 529 plan.
Meet the 529 Plan
The cost of education has become increasingly daunting over the years, and you’re probably wondering how to carry that weight. This is where the 529 plan steps in—a tax-advantage solution to ease your worries about your child’s education, covering everything from tuition and books to room and board and even some K-12 expenses.
Why the 529 Plan?
Think of the 529 plan as your financial safety net. You contribute funds that grow tax-free, and if you use the money for qualified education expenses, withdrawals are tax-free, too. This means you can potentially save thousands of dollars in taxes. Whether saving for college or covering those early school years, a 529 plan gives you the flexibility to support your child’s education every step of the way.
What If Your Child Receives a Scholarship?
We all dream of this scenario: Your child earns a scholarship, and suddenly, the 529 plan feels less essential. You can withdraw an amount equal to the scholarship without facing penalties. While the earnings will be taxed as income, you can continue using the remaining funds for other educational expenses or save them for later.
Flexibility Is Key: High School, College, and Beyond
The 529 plan’s greatest strength lies in its adaptability. Recent changes in the law mean you can now use up to $10,000 per year from your 529 plan for K-12 tuition at private, public, or religious schools. It’s all about empowering you to provide your child with the best opportunities, from their first day of school to graduation.
What If Plans Change?
Life can be unpredictable, and sometimes, college isn’t the chosen path. If your child decides on a different route, rest assured that the 529 plan offers flexibility. You can transfer the plan to another family member or yourself if you’re considering furthering your education. If higher education isn’t part of the plan, you can withdraw the funds, though there’s a 10% penalty on the earnings plus income tax.
A Hidden Gem: 529 Plans as a Retirement Boost
Here’s a tip that often goes unnoticed: If your child doesn’t need the 529 funds for education, consider using the account as a supplementary retirement savings plan. You can name yourself the beneficiary and use the savings for your educational pursuits or let it grow for future generations. This flexibility makes the 529 plan a powerful tool that can evolve with your family’s needs.
Your Future Starts Today
Starting a 529 plan is more than just a financial decision—it’s an investment in your child’s dreams and your family’s future. Begin early, contribute regularly, and watch how this plan helps you build a solid foundation for whatever lies ahead.
Ready to Get Started?
If you’re curious about how a 529 plan could fit into your financial strategy or have questions, I’m here to help. Let’s work together to create a plan that sets your family on the path to financial freedom and a bright future for your child.
Cheers,
Cooper
