Hi everybody! Thanks for joining me here, now I’m probably end up beating up some of you people. I don’t mean to that, but we’re getting so many questions about 529 Plans. You know where you can put money aside now to pay for college education, college or post graduate. Many people are like really flipped out. Seeing lots of magazine articles, there are lots on the internet but I find it confusing, the good news is, on the 529’s, there were some like, really some shady tax, not shady’s tax but it’s confusing tax things, what’s deductable? What state could you put 529 money in another states plan? Well it seems to have cooled off and calm down now. So whether you’re a parent or grandparent to have listen to me for another 5 or 10 minutes, I’m not going to tell you everything you need to know about 529’s, but I am going to show you, it is not nearly as complicated as you may think and at the end of it, end of our 5 or 10 minutes together, I’m going to give you a website that is by far the very best website as it relates to 529’s.
Now I can say that nobody is putting money into 529 Plans because $5.2 billion came in to the 529 Plans during the first quarter of 2007 so it’s not like nobody’s doing it. But not enough people are doing it. There, most every state has a 529 Plan and basically with a 529 Plan is simply this: it allows you invest money tax free, coming out tax free if used for the way. We’ll talk about that. And many states allow all or partial deduction of the contribution. So you can use or look at your own state’s 529 and now you can look at other state’s 529 Plans because what something that’s coming is this, call tax parody. That means that even though you may live in New York and invest in Ohio, there may still be, may still be a tax benefit to it.
Now, the thing you should know is, that all the 529 Plans, all 100 Plans are basically open to anybody no matter what state you live in. Some states are fighting the deductability if you don’t live in it, are fighting that deductability because a lot of states need a lot of extra and they don’t want to give you any tax deduction if you don’t live in that state. But taking the money out of the Plan tax free, getting a partial or full tax deduction on the investment and putting in dollars now for an education either post graduate or graduate post graduate, add an accredited college giving you an accredited degree.
Now who can do this? By the way get your pencil ready or you don’t have I think because you can play this back whenever you want to hear it. But I want to give you website in a minute.
Who can invest? Parents, for Johnny Jones, Johnny Jones’ grandparents, Johnny Jones’ parents and that’s it. No, anybody who’s concerned about Johnny Jones’ education not limited to family. We’ll talk more about that.
What’s the minimum? Most plans, $25, most plans as in minimum investment to get started. What’s the income limit on people who can contribute like a rough IRA and all this? No income with it, parent, grandparent, interested person in Johnny Jones. And how much totally can be invested by a person? $250, 000 and it depends on particular state. That’s about what it is and in many states especially your own state, it’s free from Federal’s income tax and many, as I said before, many states offer partial credit or partial deduction, let me get it straight now, partial deduction, tax deduction and some states offer tax credit.
The difference of a deduction and the credit, deduction becomes part of your calculation on your taxes. Credit it is right off your final number.
What happens if you take the money out you don’t use at the college education? 10 % penalty if you do it that way. And the question we get all the time and I don’t what to get in to it as I said longer than 10 minutes together. I don’t want to get involved in, is this in the details because you’ll learn more as we go. This is just a 529 introductory.
How will it affect my Johnny Jones getting financial aid if it’s in a parent’s name? Basically for financial aid, only 5.64 % of that asset’s counted against for financial aid. Number one, in the parent’s name, in the student’s name, about 20 % if it’s student owned is counted against for financial aid. And if it’s even the best, I’m not going to get more into taxes. If it’s own by other than the parent or a child, it’s called an untaxed income, you can learn more as we go.
But the bottom line is simply this, Uncle Sam has said in the States, “Here is money you can put aside, parent, grandparent or interested party for child with tax, implication tax advantage and a chance to really, really get going, getting involved, in a account getting investing for college education”. As I said it’s little as $25.
Things to look for, look at your own state’s plan first. Take a look at that, that’s where the deductions may be the best. Understand the options in that plan, check your state plan or another state’s plan for expenses. One of the knots of the 529 is sometimes like 3 ½, 3 ¾, 4 % or more in terms of administration expenses relating to the 529. Get one for 1 % or less, 1 % or less.
And by all means, be sure to do an annual check up on this. This is not like, “here’s the dough, goodbye! See you when it’s time for college”. No, and if you don’t like the state plan that you picked, your own state or another state, you’ll have a chance, let me see, we’ll make it exact. If you don’t like one state 529, you can roll over one’s per year, once per year.
The website you want to go to is Joe Hurley’s, friend of ours who’s done our show, www.SavingforCollege.com.
My bottom line is simply this, we’ll talk about more 529’s on radio and TV, more video, we’ll do audio, you read more on Dolans.com about it. It’s there, use it. Not if you should use it, which plan is best for you and the child you’re most interested, your child or somebody else’s or a grandchild.
529, it’s there, use it, we’ll talk again.
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