529 Plans: A Guide to Saving for Education Expenses

As we are amid the end of another school year, we are reminded of the importance of education. We are also often intimidated by the rising costs of education. Within the last several years, we have had both of our two children graduate from high school and college. One child attended public school and private college, whereas the other did private school and public college. Educating our children was one of our largest investments.

I am thankful that I was able to take advantage of 529 Plans. This enabled us to spread the expense out over many years, avoiding the need to come up with the money all at once or borrow the money. We experienced some scholarship assistance, but most families have significant expenses well beyond scholarship or financial aid assistance.

Please find below information on 529 Plans – one of the most effective ways to save for college, and now including K-12 expenses.

At Crescent Advisory Partners, we believe that utilizing 529 plans, a tax-advantage saving account designed specifically for education related expenses for parents and grandparents, is an effective tool for addressing the challenges of education costs. Please let us know if we can be of assistance to you as well.

Thank you,

Robb Sasser

Sr. Financial Advisor

Managing Director

Crescent Advisory Partners of Raymond James

What Is a 529 Plan?

A 529 plan is a specialized investment account that allows you to save money for qualified education expenses. These plans are named after Section 529 of the Internal Revenue Code (IRC), which outlines their tax advantages. Here are the key points to understand:

1. Types of 529 Plans:
• Education Savings Plans: These plans function like a 401(k) or IRA for education. You contribute after-tax dollars, and the money grows tax-deferred. When you withdraw funds for qualified expenses (such as tuition, books, and room and board), those withdrawals are tax-free.
• Prepaid Tuition Plans: These plans allow you to prepay tuition at participating colleges and universities. You lock in today’s tuition rates, protecting against future increases.
2. Who Can Open a 529 Plan?
• Anyone can open a 529 plan, regardless of income level.
• Parents, grandparents, and other family members often establish these accounts for a designated beneficiary (usually a child or grandchild).
3. Tax Benefits:
• Contributions to 529 plans are not federally tax-deductible, but some states offer state tax deductions for contributions.
• The real benefit comes when you withdraw funds for qualified expenses. These withdrawals are free from federal and state income taxes.
4. Qualified Expenses:
• Qualified expenses include tuition, fees, books, supplies, and equipment required for enrollment at eligible educational institutions.
• As of recent expansions, 529 funds can also be used for K-12 education expenses and apprenticeship programs.
5. Investment Options:
• 529 plans typically offer a range of investment options, such as mutual funds or age-based portfolios.
• Age-based portfolios automatically adjust their asset allocation based on the beneficiary’s age, becoming more conservative as college approaches.

South Carolina’s Future Scholar 529 Plan

In South Carolina, families have access to the Future Scholar 529 plan, which helps them save for their loved ones’ future education. Here are some key details about this plan:

• Tax Advantages: South Carolina sponsors two 529 college savings plans: a direct-sold option available only to South Carolina residents and an advisor-sold option sold nationally. Both plans allow contributions of up to $500,000 per beneficiary and allow participants to deduct 100% of their contributions on their state tax returns. This makes South Carolina one of the most generous states in terms of tax benefits for 529 plans.
• Flexibility: Future Scholar provides flexibility in investment options, allowing families to choose the right approach for their savings goals.
• Resources: Future Scholar offers various resources and calculators on their website to help families assess their saving strategies.

Why Choose a 529 Plan?

1. Tax Advantages: The tax-free growth and withdrawals make 529 plans an attractive choice for education savings.
2. Flexibility: You can use the funds at any eligible educational institution nationwide.
3. Control: As the account owner, you retain control over the funds and can change beneficiaries if needed.
4. Gift and Estate Planning: 529 plans allow you to contribute substantial amounts without gift tax consequences.

Conclusion

529 plans provide a powerful tool for saving for education expenses. Whether you’re planning for your child’s college education or considering an apprenticeship program, a 529 plan can help you achieve your goals. Here at Crescent Advisory Partners, we are here to help you choose the best plan for your specific needs.

Investors should carefully consider the investment objectives, risks, charges and expenses associates with 529 college savings plans before investing. More information about 529 college savings plans is available in the issuer's official statement. The official statement is available through your financial advisor, and should be read carefully before investing. 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. There is also a risk that these plans may lose money or not perform well enough to cover - college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. Any opinions are those of Robb Sasser and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.