This time of year is always special…crisp air, falling leaves, kids back to school and off to college. It’s a season that conjures memories of the past and hope for the future. It’s the perfect time to start saving and investing to realize those educational goals you have for your children and grandchildren.
As the saying goes, “Time and consistency are on your side”. The earlier you start, the more regularly you contribute, and the more likely you are to accumulate an amount that will provide your child with multiple options and provide you with a reduced reliance on borrowing.
529 Plans Overview
529 plans allow your contributions and the fund’s earnings to grow tax-deferred and tax-free when used for qualified educational expenses. Such expenses include tuition and mandatory fees, and in most instances, will also pay for room and board, as well as books and related computer expenses.
Getting Started and Maintaining Momentum
Setting up a 529 plan does not have to be intimidating. Many plans can be opened with as little as $25. It’s the consistency that counts. Arrange for an automatic monthly contribution from your bank account or in some cases, through your employer. And remember, the earlier the better.
As an example: Saving $100 per month, ($1200 per year) for 18 years could provide $30,775 for college, based on a rate of 4% return and tax-free growth.
If you were to borrow that same $30,775 at the start of college at 5% interest and a 10-year repayment term, the monthly payment would be $395 after graduation, and would include $16,718 in interest.
Pennsylvania’s 529 College and Career Savings Program
529 plans are state-specific. Pennsylvania’s plan has many advantages…
- Protected in state court proceedings from creditors.
- Not subject to Pennsylvania inheritance tax.
- Not counted for state financial aid purposes (savings in out-of-state 529 plans will be counted).
- Eligible to earn free tuition discounts through the SAGE Scholars Tuition Rewards program.
- Choice between the Guaranteed Savings Plan, a lower risk option, or the Investment Plan with options ranging from conservative to aggressive.
Important Decisions
Saving for your child’s higher education is one of the most important decisions you can make for your family’s future. Your One Financial Services advisor can help guide you through the options that will best fit within your comprehensive financial plan.
*Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.