Oct 16, 2018
During this installment of The Confident Wealth Podcast from the
Horizon Financial Group, hosts Pete Bush and Bill Bush discuss how
to manage, save, and withdraw savings for your child's college
education. They answer questions around how much money to save,
when you should start saving, and how to withdraw it.
- 0:50---Introduction of today´s topic--saving and paying for
college. How do you do it?
- 2:00---The 529 plan is a good way to save for college. You save
after-tax money and all the earnings on this money is tax-free when
you withdraw it. Depending on your state, you may also get a tax
deduction or match.
- 4:00---College isn't a surprise. You know it is coming and the
cost of education is escalating. Plan for it.
- 4:30--- Where do you start with saving? How much do you save?
The sooner you start, the more time you have for your money to
- 5:24---Time is your best friend when it comes to saving.
- 6:00---You don't need to know what school they are going to to
- 6:34---Saving for college is like the reverse of buying a
house. You need to save like it is a mortgage or a bill. However,
with college, you incur the bill at a later date.
- 8:30---Louisiana isn't broker fund. They are government funded,
and they use Vanguard so the funds are leaner.
- 9:00---Now with the new tax code, you are capped at deducting
$10,000 from taxes. College savings have tax and Match
- 10:30---There is a limit on the deduction, but you can always
save more than that.
- 11:30---You can also make up a prior year´s max amount the year
after if you weren't able to get the tax return.
- 12:12---In the past, you couldnt use 529 money for high school
or any time before college. 529 isn´t available before college now.
It is strictly regulated.
- 13:00---However, now there is a k-12 start account that you can
use for high school tuition.
- 14:00---How do we decide when to withdraw the funds?
- 14:30---The funds are relatively easy to withdraw. You can
write a check to the school and then write a check to yourself
through the 529 plan. Or, you send the money to the school directly
from your 529 plan.
- 15:15---What happens if your kid gets a scholarship? You are
still allowed to take out the amount of money up to the amount of
the tuition. They don't penalize you for scholarships.
- 16:20---If your kid decides not to go to college, you can
change the beneficiary to your other child who wants to go to
college. This is a tax free change.
- 17:30---The parents can also use the funds towards going back
to school as well.
- 19:27---Sometimes the 529 makes you declare which school the
kid will go to, but this does not restrict where the kid goes to
school. Also, the child just needs to be a resident of the state
when the account is opened, meaning that your kid can go to any
school out of state without penalty.
3 Key Points:
- Saving money for your child to go to college can seem
- Setting up a 529 plan is an after-tax way to compound your
earnings and pay for your child's education without tax stipulation
on your account´s earnings.
- You don't need to know which school your child will attend or
the state of the school. You start saving by setting up an account,
and if your child chooses not to attend college you can always
pivot the account to support someone else´s college education--your
other child or even your own. The 529 plan is flexible.
- “529 allows you to put
away after-tax dollars. However, the earnings on these dollars can
grow tax free if it is put away for college.” –Pete.
- “Start as early as you
- “You kind of have to
assume, in this day and age, that they are going to want some form
of higher education.” –Pete.