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By Greg Kimura
Frazier/Hunnicutt Financial
From The Asian Reporter, V18, #36 (September 9, 2008), page 7.
College funding options are easier with 529 plans
By Greg Kimura
Frazier/Hunnicutt Financial
Fall has arrived, and for many parents that means sending sons or daughters off to college for the first time. Among the impending changes that come with such an event, deciding how to finance a higher education is often foremost on people’s minds.
Just last year I attended a graduation party for my niece, who was on her way to Oregon State University. As she opened her gifts, I noticed graduation presents had not changed since I was 18: desk reference books, organizers, and a copy of Dr. Seuss’s Oh, The Places You’ll Go! All these are great gifts, but none address the practical reality of rising education costs. Thankfully, there are plenty of options that can contribute to preparing for the transition to college — beyond dictionaries and journals.
I’m talking about College Savings Plans (a.k.a. 529 plans). Most brokerage and investment companies can help with setting these up, and information is available on the web at <www.oregon529network.com>. The plans are dynamic and flexible, and families can deduct up to $2,000 from state-taxable income for contributions to an Oregon college savings plan.
An interesting aspect of the 529 plan is the ability to contribute up to $60,000 per year immune to a gift tax. Additionally, the plan owner has options on how the plan is managed — including pulling funds out of the plan, although non-qualified withdrawals may be subject to taxes and penalties — and in the case of death, the funds are not considered part of the owner’s taxable estate. The investment grows tax-free and can reach a maximum of $250,000 over its lifetime.
This plan is also beneficial to multiple-sibling families, because if an original beneficiary does not need the funds for college — if, say, that student receives a scholarship — the plan owner can name a different beneficiary and redirect the funds to another sibling. If started at the right time, a 529 plan can add up quickly. Consider all those birthday checks from Grandma and Grandpa, and you can see how paying for education could incrementally get easier. The plans are not limited to the cost of tuition; room, board, books, supplies, and equipment can all be supported with funds from education plans such as the 529.
As education costs rise each autumn, it’s comforting to know I can start planning now for that fall in the future when I send my own kids off to college. Knowing I can contribute throughout the year in different ways that are non-taxable adds relief for impending education-cost inflation. A 529 plan is a great high school graduation gift that can be started immediately, and you can always top them off with a copy of Oh, The Places You’ll Go!
Greg Kimura is a financial consultant with Frazier/Hunnicutt Financial in Portland, Oregon. Securities and advisory services are offered through SII Investments, Inc. Member NASD/ SIPC and a Registered Investment Advisor. SII and Frazier/Hunnicutt are separate companies. SII does not provide tax or legal advice.