Estes Wealth Strategies
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Are You Getting the Most from Your 529 College Savings Plan?

One of the best parts of my job as a financial advisor, hands down, is helping clients reach their financial goals. So, it's always very exciting to get a call from a client saying they are sending a child off to college and are ready to start taking distributions from their child's 529 College Savings Plan.

For families, this is the happy culmination of making regular contributions and seeing their savings grow (tax-free!) over time. Now, the real and most important investment can begin ... helping their child earn that college degree!

For me, it's further confirmation that 529 Plans are a valuable education savings vehicle and that, when actively funded and managed, they really work!

Most parents I talk to already know about 529 Plans and their benefits—and many have opened accounts for their children. A lot of grandparents, too, are getting in on the college savings action—and taking advantage of the gift tax and estate planning benefits that 529 Plans offer.  

Opening a 529 Plan is a great first step for funding a future scholar's college education. But time and time again, I see two common pitfalls that keep families from realizing the true potential and benefits of their 529 accounts.

Challenge #1: Maintaining the College Savings Momentum

It happens a lot. After that first enthusiastic contribution to a 529 account, the savings rate drops off—or stops altogether. This slows down the potential tax-free gains that can build in the account over time (the primary benefit of having a 529 Plan as opposed to other taxable savings vehicles).  

A great solution is to set up an automated monthly contribution to the account, just like you probably already do in your 401(k) plan. You'd be surprised how even a small monthly contribution will accumulate and grow over time—with minimal short-term pain to you but significant tax-free gains in the long run.

Challenge #2: Managing the Investments over Time

People open self-directed 529 accounts with the best intentions to manage them. But as time passes, it's easy to stop paying attention to the quarterly statements and lose track of the investment strategy. Letting an account lie fallow can be costly, however, because over time the investments may fall out of alignment with your savings objectives and time horizon.  

If managing investments is not your thing, or you simply don't have time to do it, you may want to consider an advisor-managed 529 Plan. The cost is a little bit more, but you'll know that someone is keeping an eye on your investments and identifying when adjustments are needed to help optimize performance.

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My job is to help clients stay on track to reaching their financial goals. Together, we can make sure your 529 Plan is working optimally for you. And I look forward to getting the call from you someday that you're ready to take that first distribution and make your child's college education a reality!

Still have questions about 529 Plans and how they work? Check out this list of frequently asked questions—or feel free to give me a call to discuss!

NOTE: Rules and laws governing 529 plans are varied and subject to change. There is a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Before investing, it is important to consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Investors should consult a tax advisor about any state tax considerations of an investment in a 529 plan before investing.


Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Estes Wealth Strategies is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions in this newsletter are those of Estes Wealth Strategies and John Estes and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

The information provided does not purport to be a comprehensive description of securities, markets, or other developments. This information has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information provided is not a complete summary or statement of all available data necessary for making an investment decision, nor does it constitute a recommendation.

Individual investor's results will vary. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation.