The tax bill provided more flexibility for using 529 funds. Illinois has chosen to disallow this flexibility for Brightstart or Bright Directions plans.
coverdell esa
529 vs. Life Insurance
Over the past few weeks I have been asked (and pitched) the idea of whether cash-value life insurance makes sense as a vehicle for saving and paying for college. By cash-value life insurance, I am including whole life, variable life, universal life and variable universal life policies. First, in almost all cases, it does not. The very few cases where it may make sense will be covered shortly. Here are some reasons why a 529 college savings plan is better than cash-value life insurance. 529 plans have very high contribution amounts. Depending on your state, the total amount you can contribute to your 529 plan is very high, and the annual contribution amounts are high as well. From a federal tax perspective, you are allowed to contribute up to $14,000 annually without incurring gift tax consequences. This amount doubles to $28,000 annually if you’re married and elect to split the […]
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Retirement vs College Saving in a Nutshell
Those of us who are parents know this conflict very well – should we put aside money for retirement, or for college saving? It may come as a surprise, but a general rule of thumb with regard to this conflict is to put money aside for retirement first, and college second. The reason behind this is that there are many ways to pay for college, such as grants, scholarships, work-study programs, student loans, parent loans, etc.. With this plethora of choices, it becomes clear that your student’s college funding needs can be met from quite a few angles, none of which should have a dramatic impact on your overall net worth (or your student’s). On the other hand, no one will give you a scholarship to retire. It is solely up to you and your savings (coupled with Social Security and any available pensions).
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How To Save (and Pay) for College
Saving for college is a priority among many parents. Often we are asked about the right savings vehicle for college education. There are a few that parents can choose from between Coverdell ESAs, prepaid tuition and 529 college savings savings plans. We’ll discuss the 529 plan here. The 529 plan is essentially a college savings vehicle very similar to an IRA or an employer-sponsored plan. Depending on the state you live in your state may have a 529 plan that will have access to stock and bond mutual funds and or a pre-determined mix that will invest the money and allocate it for you depending on your risk tolerance or your time horizon upon entering college. Many states such as Illinois well even offer a state tax deduction for any contributions that you make up to a certain dollar limit. The beauty of 529 savings plans is that there is no […]
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Have a HEART
Yes, I am organizing this writing around Valentine’s Day as a clever way to introduce a benefit military service members and their families can take advantage of as well as tie it into the title itself. The Heroes Earnings Assistance and Relief Tax Act or HEART Act provides service members and their families with certain pension and tax benefits while living or in the event of the service member’s death. According to http://myarmybenefits.us.army.mil/ these are some of the benefits that can be taken advantage of due to the HEART ACT: Accelerated vesting in the retirement plan (but not any imputed additional benefit accruals for the period of military service) Additional life insurance benefits Other survivor’s benefits depending on the benefits of the employer Employers also have the choice of treating the disabled or deceased service member as if they had returned to work the day before the disability or death occurred. […]
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The Airplane Analogy
Many parents face the decision during their working years to try to fund both retirement and college education. Some can adequately do both while others are forced to do the best they can with what money they can save. Sometimes parents can get caught up in wanting to save as much as they can for their children’s college education and forgo the need to save for or save more for retirement. When this situation presents itself, I have given my clients my airplane analogy. It goes something like this: Have you ever flown on an airplane before? If you have you know that once you’re scrunched in and belted and the plane makes its way from the gate the flight attendants break radio silence and start with their routine flight instructions. After you’re taught where the exit rows are and how to use your seat as a floatation device they […]
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