Education Planning

Why a 529 Plan Is an Important Tool

The prospect of paying for college education expenses seems like a daunting challenge. The key is to begin early with education planning that supports your financial goals. Our advisors walk you through college planning steps and get you on the right path for the future.

A 529 Savings Plan

With a 529 plan, you save for higher education costs and receive important tax advantages. These are the two most common types of plans:

College savings plan: This is a specialized investment account that covers various higher education costs. The funds can be used for qualified expenses at accredited educational institutions within the U.S.

Prepaid tuition plan: This plan offers the choice to make a lump-sum investment or monthly payments that allow you to lock in tuition rates at eligible universities and colleges.

There is no penalty for the withdrawal of funds if the beneficiary receives a scholarship or in the event of disability or death.

Gift Tax Benefits

A 529 plan is partially exempt from the gift tax and allows sizeable contributions:

  • $14,000 annually ($28,000 for married couples) per beneficiary
  • $70,000 ($140,000 for married couples) over a period of five years

Gifts are not included in your estate, which gives you reduced estate tax advantages.

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.

A Trusted Investment Partner

R4 has the customized financial strategies you need to meet your education planning objectives. Contact us today to learn more about our unique, customer-focused services.