At this time of the Year, we are yearning for Spring, a new beginning. A variety of buds poke through the ground and remind us that there soon will be blossoms. By the time you read this, daffodils, crocus and tulips will, in all likelihood, have come and gone.
The past year has helped to re-prioritize so many aspects of our lives. We have learned to ‘mask-up’, socially distance and schedule our times to be vaccinated. And now, with hope, a sense of re-opening parts of society and a belief that we can begin to build a new normal, we all can look forward with enthusiasm.
May 29th or 5/29 reminds me of life-long learning. Specifically, it represents a time to plan for a child’s or grandchild’s college. May 29th is a great day to review the plans you have or simply increase that regular contribution that you are currently making. Some may ask why is a college education so important or is it that valuable? Although college or higher education is not the best pathway for every child, it does provide some economic benefits that one might not want to ignore. Here are some interesting pieces of data for perspective.
- The US Census Bureau reports 86% Higher Annual Income for bachelor’s degree holders vs. high school graduates.
- Sallie Mae has found that 77% of families having to rule out colleges because of costs.
- The Federal Reserve Bank of New York has found a 316% increase in student loan debt since 2006.
- The Census Bureau reported that the Annual Average Earnings vary by level of educational degree: $39,371 for a High School Graduate, $73,163 for a Bachelor’s degree [86% higher] and $152,703 for a professional degree [288% higher].
- The College Board presented that in 2020-21, the average costs for college for tuition, fees and room & board are $22,180 in a Public College and $50,770/year in a Private College. While the average cost of tuition and fees at a Community College is $3,770.
All together it can be a rather overwhelming envisioning the funding of college for a child or grandchild.
Under the federal rules a program was developed to help in this effort, called a 529 Plan. It allows you to invest money in this specialized plan, where the investment grows Tax-Free as long it used to for qualified higher educational expenses, e.g., Tuition, Room & Board and fees. And, in New York State, you can actually earn a New York State credit on your income taxes, up to a certain limit, helping you to receive even more benefits along the way toward college.
Today, many who have graduated college leave with huge amounts of debt. The total student loan debt in America is in the trillions of dollars. There is a high correlation that an individual’s school debt will probably delay or prevent them home ownership, financial security and maybe even delay funding retirement savings plans.
A 529 Plan is simply one additional piece of the puzzle on how to pay for college. Not every school is covered under a 529 Plan, however most Accredited Colleges are included. So, Syracuse University, McGill in Montreal, Harvard, Colgate, All SUNY Schools, and the Sorbonne in Paris are just a few that come to mind. Tax free growth and tax credits on top of the accumulation of assets to support the expenses is something that should not be ignored.
Getting a [A round to it] someday, may not be the best strategy.
Children grow up so quickly.
On May 29th, please call us to discuss this important strategy for your child(ren) or grandchild(ren)! Today is Someday!
Respectfully submitted by Jon Selzer