Financial Planning for College – What is a 529 Plan and How Does it Work‏?

529 PlansIn 1996 the Internal Revenue Code was modified to include Section 529, creating an education savings benefit for higher education. While contributions to the Plan are not tax deductible, the earnings on the Plan are; making the 529 College Savings Plan an excellent saving tool when you are doing your financial planning for college for your children. With changes to tax code going into effect this year, the Plan becomes even more attractive.

A financial planner can help you enroll in a 529 College Savings Plan

In 2013, couples earning over $450,000, and singles earning over $400,000, will face higher taxes and lower deductions; while all Americans will see greater withholding from their paychecks. In addition, it is highly likely that we will see significant cuts to Federal Financial Aid even as colleges and universities continue to increase tuition and fees. By beginning to save for college now, your financial planning for college will be much more likely to be successful in covering your child’s tuition and expenses later.

A certified finance planner will help you find the best 529 Plan for your family, taking into account all aspects of your family’s current and expected future needs.

Saving for college continues to be a high priority for families

A 529 College Savings Plan should be the first choice when you and your family are performing your financial planning for college. The Plan makes it easy to save with a low minimum investment, automatic contributions, and target-date funds that manage investment risk for you – moving more into bonds and cash as your student approaches college age. With a 529 Plan, you can start with a small initial investment and adjust as you refine your college savings goals.

Financial planning for college does not need to be complex or difficult. A 529 Plan will allow you to…

  • Earn tax free investment returns on your college savings – as long as funds are used to pay qualified higher education expenses
  • Retain control of the funds invested throughout the life of the Plan – funds do not become the property of your student
  • Benefit from professional investment management with target-date funds
  • No tax reporting on earnings until you withdraw the funds
  • No income limitations on contribution amounts – high income earners can receive the maximum benefit of 529 contributions

As part of your comprehensive financial planning, with a certified financial planner, your financial planning for college can be greatly simplified. Tamarind Financial Planning is here for you, with individual financial planning strategies and personal investment management techniques to help you set, meet, and exceed your financial – and life – goals.

Take 3: The three pros even DIY’ers need on their team

I have a neighbor who is a big do-it-yourselfer. He cleans his gutters every spring, prunes his rose bushes and replaces his front porch light.

I’m always impressed by people who fearlessly tackle any task.  But even my neighbor knows when to summon the pros. He called in contractors to install a new garage door and to repave his driveway.

If you’re a DIYer for tax returns and investment decisions, that’s great. You’re taking charge of your future. Still, it’s always wise to have a stable of professionals you can call on for expert advice. Like my neighbor, knowing when a task is beyond your ability is, truly, the hallmark of a smart DIYer.

Here are three people you’ll want to have on your team to watch your back and protect your assets. Together, they’ll give you unparalleled peace of mind.

Financial planner: I listed this first because, well, I am one. So I have firsthand knowledge of how important my work is to my clients’ wellbeing.

When you collaborate with any certified financial planner, you know you’re on the right track to meet your goals: the freedom to retire, pay for your children’s education or live the kind of lifestyle you envision.

Even if you’ve crafted your own financial map, a financial planner can review it, pointing out shortcomings and other options to help you meet your aims. And if you lack expertise in areas such as insurance or investments, a planner can ably fill in the gaps.

Estate planner: Yes, it can be uncomfortable to think about who will raise your children and receive your property should you die suddenly. But it’s even scarier not to think about those things.

If you and your spouse live in California, have an estate plan in place and die with a home and assets worth $1 million, your heirs will save $23,000 in probate fees. That money stays in your family rather than going to cover court fees. It will also be available quickly, rather than in the 18 months the probate court typically needs to sort out assets.

Another benefit is that you can set the age that your children will receive your assets. The probate court gives heirs the full amount at age 18. But with a plan in place, you can delay and stagger payments to ensure that your children have the maturity to make wise financial decisions.

A seasoned estate planner will create the documents—wills, trusts, durable powers of attorney and healthcare powers—that carry out your wishes after you’re gone.

Tax advisor/CPA: Maybe you’re one of those people who delights in hunkering down each spring at the dining room table with your donation receipts, W-2 forms and mileage records. But most people feel a little queasy at the thought of preparing their own tax return. That’s reason enough to work closely with a CPA.

You give her a neat stack of records, and she’ll do more than fill in all those blanks on your tax return. She’ll also suggest deductions you might have missed that will ease next year’s tax burden. And she’ll educate you about tax-law changes that affect your bottom line.

One of the most valuable services a CPA provides is the reassurance that if you’re audited, you won’t be the one explaining the math and the deductions to the IRS agents.