How many parents take the step to set up and regularly fund a college savings account for their kids? 35% of families use a college savings fund, but did you know that 54% of parents are unaware of the 529 program(s) available? We recently shared about the Nevada Prepaid Tuition Program and wanted to ensure our 529 College Savings Plan article was also up to date for you!
Table of Contents
What is a 529 College Savings Plan?
Simply put, a 529 College Savings Plan is a tax-advantaged savings plan designed to help pay for a college education or qualified trade school (also known as a qualified apprenticeship program).
This plan is named after section 529 of the IRS code.
Originally limited to post-secondary (undergrad) education costs, it was expanded to cover K-12 education in 2017 and trade school programs in 2019.The purpose of these savings plans is to help individuals or families save for college, save in a tax-advantaged way, and save early in the easiest way possible.
529 Quick Facts
- 529 plans grow tax-free as long as you use the funds for qualified educational expenses
- Savings can be used for trade schools, vocational schools, community colleges and graduate school, not just four-year universities
- Savings can be used at schools nationwide
- Beneficiaries can be changed
- NV529 Plans make great gifts, especially from grandparents!
- The earlier you start saving, the more your account will grow
Nevada 529 Plans Offered
There are a 5 plan options where you can get a 529 College Savings Plan and depending on your current financial investments or advising, one may work better for you than another.
If you want to avoid additional sales charges/fees beyond the standard fund and admin fees, you want to look at these plans that you set up yourself and make the initial investment:
- The Vanguard 529 Savings Plan
- USAA 529 Education Savings Plan
If you are looking for advisor sold plans, in which you will incur sales charges/fees on investments, then you might consider:
- Putnam 529 for America
- Future Path 529 Plan (formerly known as SSGA UPromise Plan)
- Wealthfront 529 College Savings Plan
Today, we are going to talk a little more about the Future Path 529 Plan as it is the one we have the most experience with.
Related Articles You May Like:
- What is a Kindergarten Assessment and Why Should You Care?
- How To Support Your Kids Mental Health
- The Impact of Youth Sports, a Coach’s Perspective
Where & How To Set Up a 529 Plan
I am focusing on Future Path 529 Plan because I looked into many others, and this one is literally the easiest and offers a free (online) informational meeting with an advisor.
This plan is sponsored by the State of Nevada and managed by Ascensus who offers free informational webinars if you want to learn more.
Is It Complicated to Set Up?
I’m writing to tell you how easy it is to set up a 529 College Savings Plan for your child, or children. Especially in Nevada. You can start for as little as $15 to open an account, and fund the account for as little as $15 per month— and go from there.
Future Path 529 Plan
There are four investment types to choose from— designed to match the level of risk you are comfortable taking. I personally like the conservative choice!
There are low minimums, no enrollment fee, and if you are a resident of Nevada, your annual account management fee is waived.
The maximum you can save in this account is $500,000.
Free Informational Meetings
Did you know that you can participate for free in an hour-long Zoom meeting with a financial professional You can ask questions or participate in a Q&A at the end.
I did just that! I can’t tell you how helpful it was. I was comfortable to take the next step— to open a 529 College Savings Plan for my son, age 4.
Here is the link to register for the recurring Zoom meeting.
Things to Know Before Enrolling
All You Need is an Account Owner and a Beneficiary
The 529 College Savings Plan is typically established by parents or grandparents on behalf of a child or grandchild, who is the account’s beneficiary.
The person you’re opening the account for (the beneficiary) must be a U.S. citizen or resident alien with a valid Social Security number or other taxpayer identification number. The beneficiary doesn’t have to be related to you. You can also name yourself as beneficiary and use the money for your own education, or that of an unborn child.
The 529 Plan is “Tax-Advantaged”
Money in the account grows on a tax-deferred basis until it is withdrawn. As long as the money is used for qualified education expenses, as defined by the IRS, those withdrawals aren’t subject to either state or federal taxes.
Year after year, your small monthly investments grow and earn money.
Funds must be used to finance qualified education expenses (like tuition, books, supplies, computers, and room and board).
One misconception is that a 529 College Savings Plan will negatively affect your child’s ability to receive financial aid awards.
In truth, the funds you set aside in a 529 College Savings Plan will have a minor impact on your child’s financial aid award each year. Having those funds available will drastically reduce the total amount of student loans you need to apply for each year.
College Costs Continue to Rise
The College Board reports that a moderate college budget for an in-state student attending a four-year public college in 2023-2024 costs on average $28,840 per academic year.
For out-of-state students at public colleges, the average budget comes to $46,730 per academic year.
For students attending private colleges, the average budget is$60,420 per academic year.
Before you panic, read on!
Most Students Receive Financial Aid
When it comes time to pay for college, undergrads receive an average of $16,360 in financial aid per year.
Aid packages are in the form of grants, scholarships, work-study, or student loans.
Think of the money you set aside in a 529 College Savings Plan to assist with these rising costs. As I said, having funds available right upfront will drastically reduce the total amount of student loans your child will need to apply for each year.
What if the Beneficiary doesn’t go to College?
This is a great question. As of 2019, a new law allows 529 funds to be used to pay for a qualified trade school (also known as a qualified apprenticeship program), which typically combines on-the-job training with classroom instruction.
To qualify, the apprenticeship must be registered with the federal Labor Department.
The U.S. Department of Labor’s Office of Apprenticeship has established apprenticeships in over 1,000 occupations in a variety of industries.
The account holder can also change the beneficiary to another family member, like a sibling.
As a last resort, the account holder can withdraw the money, but it will be a “non-qualified” withdrawal and will be subject to federal, state, and local taxes, in addition to a 10% penalty tax.
529 Funds to Repay Loans
Under a new law signed in 2019, up to $10,000 from a 529 account can be used to repay the beneficiary’s student loans.
Perks for Nevada Residents
The Silver State Matching grant is available to Nevada residents. You can read more about what it takes to qualify if you are approved, and the application period.
Basically, this grant will match your yearly contributions up to $300 per year with a lifetime maximum of $1500 per beneficiary.
UPromise Mastercard
If you already have a credit card you use to build rewards and get cash back, why not have one that delivers the cash back directly into your child’s savings account? UPromise has a Mastercard that does just that.
Cardmembers earn 1.529% cash back for purchases with this affiliated credit card when it is linked to an eligible 529 College Savings Plan. Shop online, book travel, use at restaurants, buy groceries.
UGift Might be my Favorite Perk!
This is so smart. If you set up a 529 College Savings Plan you can have your child’s grandparents or other family members make a gift donation to your child’s college account for birthdays or holidays.
It is super easy to navigate and what a great gift idea!
Payroll Direct Deposit is Available
You can enroll online to fund the account through payroll direct deposit from your paycheck. You can contribute as little as $15 per pay period.
Ready to set up your 529 College Savings Plan?
In the end, most 529 College Savings Plans are about the same. These plans are tax-deferred savings accounts to support the academic education (or qualified trade school) expenses for your child once he/she is 18.
You put money in, let it grow, and don’t touch it.
The one difference with Future Path 529 Plan is that you can open this account for $15. For most others you need to open an account with $1000.
Do you have a college savings plan for your child? If not, would you consider it?