Consider an Education Savings 529 Account.
I have eight children and three grandchildren, so I am keenly aware of the present and future projected costs of a college education.
Most parents and grandparents want their progeny to receive the benefits of a good education so that children can learn the skills which will allow them to become productive members of society as adults. However, to afford the potential cost of a college education, it’s important to start saving early in a child’s life.
The most efficient type of account to save for future education related expenses is hands down a tax-advantaged 529 college savings account. Almost every state sponsors their own 529 plan, but you don’t need to use your state’s plan, and it pays to shop. We recommend that our clients use the Utah 529 plan (my529.org) because of low fees and excellent investment options. You do not need to pay an advisor to manage money in a 529 account.
An Arizona couple filing jointly can receive up to $4,000 in annual AZ tax credits for funding a 529 account. Money invested in a 529 grows tax free and comes out tax free as long as the money is used for any educational related expense (i.e., tuition, room and board, a computer, supplies, transportation, etc.).
529 accounts can also be an important estate planning tool. Under the current gift tax exemption, a married couple can fund a 529 account up to $30,000 per child each year. A special provision also allows you to pre-fund up to 5 years’ worth of your exemption ($150,000) in one lump sum.
Consider funding a 529 for a newborn and inviting parents and grandparents to make an investment in that child’s future.
Scott Johnson is the CEO of DecisionPoint Financial, LLC. He is a CERTIFIED FINANCIAL PLANNER™ and an Accredited Investment Fiduciary. He and his firm provide comprehensive financial planning and investment management services to individuals and institutions. Scott can be reached at (480) 553-6249 or scott@dpplanners.com. Visit decisionpointfinancial.com.
DecisionPoint Financial, LLC is a Registered Investment Advisor. All investments involve risk. Risks associated with investing in securities include increased volatility and loss of principal. Past performance is no guarantee of future results. The information herein is educational in nature and does not represent investment advice. All rights reserved. DecisionPoint Financial, LLC © 2020.