Amplify Financial : College Planning

College Planning

No matter the age of your child, it’s not too early or late to plan for college expenses. Education savings plans like Section 529s and CESAs allow you to start planning for your child’s future early on. But for those who have not started yet, there are many options available to prepare yourself and your child for an affordable education. Read on to learn more about the opportunities available to your family, then contact your AMPLIFY Financial Consultant for details and assistance with developing your plan.

SECTION 529 PLANS

Long-term investment vehicles for education

Section 529 College Savings Plans are tax-favored college investment programs. Contribute to a Section 529 Plan regardless of your annual income or age. Each U.S. state sets its own maximum limit for lifetime contributions, but all state plans are in excess of $100,000 with the average limit being about $220,000. With your 529 plan:

• Any earnings accumulate tax-deferred, and withdrawals for qualified expenses are not subject to Federal income tax. Withdrawals for non-qualified expense are subject to income tax and a 10% IRS penalty
• Beneficiary may be reassigned to another family member
• Variety of professionally-managed investment options available
• Investment options may be changed annually
• There are several potential Estate Planning benefits

Investors should consider the investment objectives, risks, charges, and expenses associated with a 529 Plan carefully before investing. The issuer’s official statement contains this and other information about the investment. You can obtain an official statement from your financial representative. Read carefully before investing.

COVERDELL EDUCATION SAVINGS ACCOUNT (CESA)

Tax-free accounts for educational expenses

CESAs help you save for a child’s primary, secondary or college educational expenses until the child reaches 18. Parents and grandparents may set up a CESA, contributing up to a total of $2000 per year per child. Contributions and earnings may be withdrawn from the CESA tax-free to pay for qualifying education expenses. Non-qualified withdrawals are subject to taxes and penalties. Limitations may apply, but if your income is too high you may have other options.

SAVINGS BONDS

Tax-advantaged education investments

U.S. Series EE and Series I Savings Bonds are another tax-advantaged investment for education expenses. Eligible individuals can use these bonds to pay for a child’s qualifying education expenses while excluding income earned on the bonds for Federal tax purposes. Savings bond interest is also exempt from state and local income taxes. Income limitations apply, and only bonds issued after 1989 can be used. Please contact an AMPLIFY Financial Consultant for details and requirements.

CUSTODIAL ACCOUNTS

Gifting assets to your child for potential tax benefits

Custodial accounts, established under the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act (UGMA/UTMA), are a traditional way to invest for a child’s education. The assets are held in the name of the child, but are managed by the custodian. UGMAs/UTMAs may provide tax benefits for higher income families because the earnings are usually taxed at the child’s tax rate.

This information is not intended to be a substitute for specific individualized tax,legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Whether you need to manage transitions, learn about your savings and cash management or identify and plan your retirement and investment options Dan wants to help. He offers a complementary 30-minute consultation to help you identify the financial strategy that’s best for you. Please contact Linda Koop at 512-519-5476 or use our contact form to set up an appointment.