Latest news with #529plan
Forbes
3 days ago
- Business
- Forbes
How The Big Beautiful Bill Changed 529 Plans For The Better
University student, woman and outdoor for graduation with memory, smile or thinking or achievement ... More at campus. Girl, Japanese person and graduate with memory, decision or choice for future at college We've been saving into a 529 plan quite aggressively since the birth of our first child over ten years ago. As we had more kids, we continued to make these contributions because you can always change the beneficiary of a 529 plan without penalty. If our first child didn't end up needing it, our backup plan was to change the beneficiary to our second. With how much college costs these days, and will likely increase in the next decade, chances are our 529 plans were going to be emptied. If you don't have four kids, the idea of putting too much into a 529 plan is a big risk. A good risk but a big one nonetheless. But when the SECURE Act 2.0 was signed into law, it changed everything. There's now no risk to funding a 529 plan. 529 Plans Can Be Rolled into Roth IRAs The big headline change was that, subject to state laws, you can now roll over up to $35,000 of unused 529 plan funds into a Roth IRA for the beneficiary. There is no tax and no penalty if you follow certain conditions: This means you can contribute more into a 529 plan knowing that $35,000 of unused funds could eventually be moved into a Roth IRA. 529 Plans Are More Versatile Than I Remembered The ability to rollover unused 529 plan funds was the only major change in SECURE Act 2.0, there were additional changes to 529 plans that you may have missed. There were three major changes by SECURE Act back in 2019 and the Tax Cuts and Jobs Act of 2017. 529 Plans can now be used to cover K-12 tuition of up to $10,000 per student as long as your state allows it. Previously, you couldn't use it for K-12. The SECURE Act of 2019 made it possible for you to use 529 plan funds to pay for apprenticeship program expenses, with no cap, as long as the program is listed with the U.S. Department of Labor. This includes fees, books, supplies, and any other required equipment. Finally, you can now use up to $10,000 of 529 plan funds to pay for qualified student loans per person. The $10,000 is a lifetime limit that applies to the beneficiary and each of their siblings. Also, the interest paid with 529 plan funds isn't tax deductible. With the cost of college higher than ever, increasing the versatility of 529 plans helps more people pay for college.
Yahoo
19-07-2025
- Business
- Yahoo
I've loaded my daughter's 529 plan for years — but now suddenly she wants to skip college. I'm mad. What now?
You've spent years saving diligently for your daughter's education, only to learn she's decided not to go away to college after all. If you have thousands stashed in a 529 plan, you might be wondering: What happens to that money now? At the end of 2024, roughly 17 million 529 plan accounts were open in the United States, worth a collective $525 billion in total assets. A 529 plan remains one of the most flexible education savings tools available, but it's also one of the most misunderstood. That's because even if plans change, 529 college plan funds can end up being used for things that have nothing to do with traditional notions of higher education. If it involves learning, there's a solid chance your 529 savings can help cover related expenses. "It's important for Americans to understand how flexible 529 plans have become,' said Andy Esser, a financial advisor Andy Esser at Edward Jones, which issued a report in May that found 52% of respondents said they didn't know what 529 plans are. Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it What is a 529 plan and how does it work? Named after Section 529 of the Internal Revenue Code, 529 plans are tax-advantaged saving plans for future education costs. They come in two main types: prepaid tuition plans and education savings plans. The plans typically involve contributing after-tax dollars and any investment growth is tax-free as long as withdrawals are used for qualified education expenses. These plans were created to make saving for college more attractive by reducing the sting of taxes on those savings. Typically, families use 529 money to pay tuition, fees, room and board, books — even certain technology costs at eligible institutions. In recent years, the definition of qualified expenses has expanded: You can also use up to $10,000 per year for K–12 tuition at private schools and even make limited payments toward student loans. The catch: If you use the money for anything that doesn't qualify, you'll owe ordinary income tax on the earnings portion of the withdrawal plus a 10% penalty, seriously eroding the value of your savings. What happens if your child doesn't go away for college? If your daughter isn't heading off to a four-year college campus, your first step is to figure out whether she's forgoing higher education entirely or simply choosing another path. The good news is that 'qualified education expenses' don't just mean traditional, residential college costs. If she's planning to attend a local community college, a trade school, or even take classes online from an accredited institution, you can still use 529 funds to cover tuition and other eligible expenses without penalty. Many families don't realize that accredited vocational and technical schools are also fair game for 529 plans. Even if she commutes from home, her tuition and fees may be covered. If she's decided to study part-time, you can still use the funds proportionally for eligible costs. Some families find that room and board expenses aren't needed if their student is living at home, but tuition, books and required supplies continue to qualify. Read more: Americans are 'revenge saving' to survive — but millions only get a measly 1% on their savings. What exactly are qualified education expenses? Qualified expenses include tuition and fees at eligible institutions, books and supplies required by the program, certain technology costs (like a computer or software, if it's required) and room and board for students enrolled at least half-time. For K-12 education, you can withdraw up to $10,000 per year per student for tuition at private or religious schools. There's also a provision that allows up to $10,000 lifetime per beneficiary to pay down qualifying student loans. This all means that if your daughter is still interested in some form of learning, just not in the way you initially planned for, you may be able to spend most or all of the 529 balance penalty-free. What if your child opts not to pursue formal education at all? Let's say your daughter has decided to forgo college, trade school, or any eligible training program altogether. You still have options. You can leave the money in the 529 account indefinitely. There's no rule that says the funds must be used short-term. The account can keep growing tax-free. Your daughter might change her mind in the future — even as an adult. You can also change the beneficiary of the 529 plan and transfer the funds to another child, a niece or nephew, yourself, or even a future grandchild without triggering taxes or penalties, as long as the new beneficiary is a qualifying family member. If none of these options work for you, consider rolling some of the unused funds into a Roth IRA for your daughter. Thanks to recent rule changes, up to $35,000 of unused 529 funds can be rolled over to a Roth IRA in the beneficiary's name over their lifetime, starting in 2024, subject to annual contribution limits and eligibility rules. This can turn unused education savings into retirement savings — a smart long-term play. Lastly, if you decide to take the money out for non-education expenses — say, buying a car or making home improvements — you'll face that 10% penalty and pay ordinary income tax on the earnings portion. Only your original contributions come out tax-free, as you already paid tax on them. That could make non-qualified withdrawals the option of last resort. What to read next Robert Kiyosaki warns of 'massive unemployment' in the US due to the 'biggest change' in history — and says this 1 group of 'smart' Americans will get hit extra hard. Are you one of them? How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you'll need a substantial stash of savings in retirement Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
Yahoo
26-06-2025
- Business
- Yahoo
60 Financial Goals To Achieve Before You Turn 60
Setting financial goals can help you establish good money habits. While short-term goals can get you started, long-term goals lead to wealth. For You: Trending Now: Having a good grasp of your finances gets more important as you get older and move closer to retirement. Even if you plan to work forever, it's possible that you may no longer be able to work due to a physical or medical condition. That's why it is good to stockpile money and make smart decisions now instead of playing catch-up a few years later. These are some of the financial goals you should achieve before you turn 60. 1. Have no credit card debt 2. Pay off your mortgage 3. Make sure you never spend more than you earn each month 4. Pay off any personal loans and auto loans 5. Put yourself in a position where you no longer need to take out debt Check Out: 6. Your net worth should be at least 25 times your annual salary 7. Invest at least 10% of your paycheck and gradually increase this number 8. Invest in a diversified portfolio that includes stocks in various sectors. A few ETFs are sufficient. 9. Invest enough money in your children's 529 to cover college tuition. You can start with $100 per month. 10. Have one investment that you have held for at least one decade to avoid emotional investing. 11. Invest in career skills that allow you to double your income over time 12. Start a small business or a side hustle and commit to it for at least one year 13. Learn negotiating skills and ask for a raise at least three times before you turn 60 14. Continue applying for new jobs so you can job hop if needed and create more leverage in negotiations 15. Create a retirement plan so you know when to retire or switch to part-time work 16. Have an emergency fund that can cover at least one year of living expenses 17. Diversify your investments across multiple sectors 18. Gradually move some capital out of high-risk assets and put them into stable, low-risk assets 19. Invest in assets that generate cash flow 20. Don't log into your stock portfolio for one week and monitor how you feel about your investments 21. Renovate your home 22. Update your appliances 23. Allocate money for home maintenance projects in a separate savings account 24. Update major parts of the home, like the roof and HVAC system, before retiring 25. Consider a good home warranty 26. Ensure you use auto payments to avoid any late payments 27. Pay off all of your debt to boost your credit utilization ratio 28. Avoid taking out new debt when you get older 29. Keep your old accounts open 30. Create a budget that keeps you on track 31. Commit to staying disciplined for your financial success for many years 32. Track your expenses every month 33. Stop impulsive spending by deciding how you will spend your money 34. Avoid negative self-talk when it comes to finances and life in general 35. Establish why you want to outperform others and make more money and, if needed, periodically adjust this purpose as your life changes 36. Max out the contributions to your 401(k) and IRA plans, including catch-up contributions 37. Strategize how you will withdraw funds from your retirement accounts to minimize the tax impact 38. Create an IRA in addition to your employer's 401(k) plan 39. Create a solo 401(k) if you are a business owner who doesn't have employees 40. Review your portfolio each year to ensure it aligns with your risk tolerance and long-term goals 41. Determine which expense categories matter the most to you 42. Ruthlessly cut out expenses that do not align with spending categories that do not increase the happiness of you or your loved ones 43. Live below your means 44. Spend what is left over after investing and saving instead of saving what's left over after you spend money 45. Don't feel guilty about buying something that has a meaningful, long-term positive impact on your life 46. Create a will 47. Speak with a professional about estate planning 48. Establish trusts to avoid probate 49. Determine your power of attorney 50. Choose your beneficiaries 51. Put your extra money in a high-yield savings account that has a 3.00% APY or higher 52. Comparing banking apps to determine which one builds your wealth the most 53. Review your bank's resources and make sure you are maximizing them 54. Set up automations like AutoPay and auto-invest 55. Streamline your finances so you can easily access your investments, bank accounts and other financial products 56. Review your policies to ensure you have enough coverage 57. Check your policies to see which ones still make sense for your financial profile 58. Get good health insurance 59. Determine which assets you want to protect the most 60. Protect your loved ones with a good insurance policy More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 10 Cars That Outlast the Average Vehicle Are You Rich or Middle Class? 8 Ways To Tell That Go Beyond Your Paycheck This article originally appeared on 60 Financial Goals To Achieve Before You Turn 60
Forbes
10-06-2025
- Business
- Forbes
Gifts To Give Minors In Your Life To Set Them Up For Financial Success
K Through 12 Children Appreciating Gifts When I talk to parents of young children, they are often touched by the generosity of their families and friends when it comes to gifts for their children. They often say they're up to their ears in toys and don't know what they'll do when the next birthday or holiday comes around. Here are some gifts you can give to young children and teens in your life to set them up for financial success in the future. Young children have the advantage of time on their side but an inability to comprehend or manage money on their own. Here are some things you can do for young children to grow their wealth in a controlled setting. Whether the child in question already has a 529 College Savings Plan in their name or they need you to set one up for them, anyone can then contribute money toward that minor's future higher education needs to grow tax-free. If you buy them $100 worth of clothes and toys when they are born, that will likely get donated or thrown away. If you gift $100 into a 529 when they are born, that could be worth around $600 for education expenses once they reach college age assuming an average return of 10.5%. These plans can easily be transferred between siblings and down to the next generation if the minor ends up having children. However, it is important to be aware of tax implications of not using the 529 College Savings Plan for qualified higher education expenses or a limited amount of Roth conversions. Growth of the funds would be taxed at ordinary federal and state income tax rates and subjected to a 10% IRS penalty. In all, most people would be better off investing in a traditional investment account than making non-qualified withdrawals from a 529. Uniform Transfers to Minors (UTMA) accounts are another way to make gifting to a minor in your life simple. You can gift cash or securities into an account for the child. UTMA accounts allow minors to invest for their future while limiting their access to the funds before they reach the age of majority, which is 18 or 21 depending on the state. An adult guardian can spend the funds for the minor's benefit before the age requirement is met for things like tutors, summer camp, education expenses, sports, or anything else the minor may need. Teenagers in your life might have a real interest in saving for the future and learning about investing. Here are some tools to not only support them in saving for the future, but also to foster a sense of responsibility in them around money. As children become teenagers, they may have work that they are paid for, including babysitting, yard work, housesitting, and after-school jobs. If they have any level of earned income, they are eligible to contribute their earnings up to a maximum of $7,000 per year into a Roth IRA. Others can also contribute on their behalf if the amount does not exceed the annual maximum. Giving a teenager a pre-paid debit card, especially one that may be tied to a chore chart or allowance can teach that teenager budgeting and fiscal responsibility. In a world that increasingly turns to digital payment methods, teaching fiscal responsibility with cash allowances becomes difficult. Gifting a teenager a financial literacy book or course can also set them up for financial success. It will also support critical thinking and allow them the tools to find research from reputable sources and not default to getting advice from social media. Here are some books on investing that can get teens started on the basics that I would recommend: Making a charitable donation in a teenager's name can foster a sense of social and personal responsibility. As they grow their wealth down the road, implementing charitable strategies can also support them in their journey by fostering tax incentives. In summary, thoughtful gifts for young children and teenagers can shape their financial futures. Contributing to tax-advantaged accounts for minors and promoting financial literacy can foster responsible habits. By choosing wisely, we can equip the next generation with the skills needed for lasting financial success.
Yahoo
07-06-2025
- Business
- Yahoo
Should I Prioritize My 529 Plan or Focus on Other Savings Opportunities for My 16-Year-Old's Education?
There are benefits to saving for retirement in a 529 plan. Because these plans impose penalties for non-educational withdrawals, you may want to limit how much money you put into one. Brokerage and savings accounts could be a viable alternative to a 529. The $23,760 Social Security bonus most retirees completely overlook › As always, The Motley Fool cannot and does not provide personalized investing or financial advice. This information is for informational and educational purposes only and is not a substitute for professional financial advice. Always seek the guidance of a qualified financial advisor for any questions regarding your personal financial situation. If you'd like to submit your question for feedback, you can do so here. If the idea of paying for college is just about as overwhelming as boarding a plane to skydive out of, you're not alone. U.S. News & World Report puts the average cost of tuition and fees at a whopping $43,505 for private colleges. For out-of-state students at public colleges, that number is considerably lower at $24,513. And for in-state public college, tuition and fees are $11,011 on average based on data from the most recent academic year. But even the "cheapest" of these options is one you might need to save diligently for, especially if you have multiple children. And while you might think that it pays to put all of your college savings into a 529 plan, you may want to explore other options, too. Recently, a Reddit (NYSE: RDDT) poster asked if they should be saving all of their money in a 529 plan for their 16-year-old's education, or if they should be branching out. They already have an impressive $70,000 balance in a 529, but they're not sure what other savings vehicles they should focus on in the next two to three years. What is your target 529 balance?byu/Urbanttrekker inMiddleClassFinance Thankfully, the poster is already saving 25% of their income for retirement. They're putting 5% into the 529 and another 10% into what they call "undefined savings." They're set with their emergency fund and have no debts aside from a low-cost mortgage they're eight years from paying off. There's nothing wrong with the poster continuing to save for college in the next few years. But they may want to look outside of a 529 plan. Although 529 plans offer the benefit of tax-free gains and withdrawals, they can reduce the amount of financial aid students get. These plans generally won't have an impact on merit-based scholarships, and they tend to have less of an impact on aid if the parent owns the account, not the student. But that's something to keep in mind. The other issue is that withdrawing 529 funds for non-qualified education expenses generally results in a 10% penalty on the gains portion of those funds, plus taxes on the gains portion of the withdrawal. Now thanks to the SECURE 2.0 Act, it's possible to roll up to $35,000 of unused 529 plan funds into a Roth IRA without incurring taxes or a penalty. So that is one way to deal with an overage. Another option is to designate the extra funds for a different beneficiary – if one exists. The Reddit poster above only makes mention of one child. So designating a different beneficiary may not be a viable solution. It's great that this Reddit poster wants to continue saving for their child's education even after having done such a great job already. But since they already have a fair amount of money in a 529 plan, they may want to branch out and put their remaining college savings elsewhere. One option to consider is a taxable brokerage account. The money in there won't grow tax-free as is the case with a 529. The benefit, however, is flexibility. The poster's child may not end up needing more money for college than what's already been saved. Rather than deal with the headache of having to figure out a plan for excess funds, putting the money into a brokerage account makes it available for any purpose at any time without restriction. The poster could let their child use that money to buy a car or fund a move to a new city after college. Another option is to look at a high-yield savings account. This isn't a great option when you're dealing with a long investment window. But the poster's child is 16, which means college may be just a couple of years away. If they want a safe, stable home for that money without taking on the risk of stock market fluctuations, a high-yield savings account fits the bill. And thanks to today's interest rates, it's not like a high-yield savings account won't earn any money. Saving for a child's education is a great way to avoid having them graduate with a pile of debt. It could make sense to use a 529 plan for the tax benefits involved, but that's not the only account you should consider – especially if you're nearing the point where your child is headed to college and you want to minimize some of your risk. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Should I Prioritize My 529 Plan or Focus on Other Savings Opportunities for My 16-Year-Old's Education? was originally published by The Motley Fool Sign in to access your portfolio
