529 Plan History
A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.
State plans are OK for out of state colleges
529 Plans can be used to meet costs of qualified colleges nationwide. In most plans, your choice of school is not affected by the state your 529 savings plan is from. You can be a CA resident, invest in a VT plan and send your student to college in NC. Check to see if your institution is eligible under 529 rules.
Which states offer 529 plans?
Nearly every state now has at least one 529 plan available. It’s up to each state to decide whether it will offer a 529 plan (possibly more than one) and what it will look like, meaning 529 plans can differ from state to state. You should research the features and benefits of your plan before you invest, research state 529 plans and even compare between plans.
As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to you, the plan participant. See the top 7 benefits of 529 plans.
Some states (but not all) offer tax incentives to investors as well. Research your state’s tax treatment.
More on Tax Benefits
Watch Savingforcollege.com’s Chris Stack in video below (airing date March 31, 2011).
Types of 529 plans
529 plans are usually categorized as either prepaid or savings plans.
Savings Plans work much like a 401K or IRA by investing your contributions in mutual funds or similar investments. The plan will offer you several investment options from which to choose. Your account will go up or down in value based on the performance of the particular option you select.
Prepaid Plans let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Private College 529 Plan is a separate prepaid plan for private colleges.
Educational institutions can offer a 529 prepaid plan but not a 529 savings plan (the Private College 529 Plan is the only institution-sponsored 529 plan thus far).
Enrolling in a 529 plan
If you want more information or want to set up a 529 plan today, please contact us for assistance.
So there I was, hanging out at the bar having dinner last Tuesday. Next to me was this guy with a flight of wine glasses. Out of curiosity, I had to ask, “What’s your favorite? He gave a long look at the three glasses and then said, “the pinot from Washington State. It’s light, smooth and silky.” We traded names and continued to chat for a while as we passed the night away. A while later, Monica, our server, asked if we were finished and we both said it was time to call it a night. Monica tallied up our bills and presented us our respective bills.
Both of us reached for our wallet. Right then, it dawned on me so I asked, “Hey, Tom, what’s the most important card in your wallet?” Tom looked into his wallet and pulled out a picture of his kids and smiled at me. “Tom, I get that—they’re important in your life! Which card though?”
Tom fingered through several credit cards and landed on his VISA card. He started to pull it out and then saw the one. “John, it’s my medical insurance card.”
“Yeah, that’s what I thought as well until …”
Tom quickly chimed in, “Until what?”
I paused and then said, “… until I learned that my medical insurance card paid everybody but me. You see, when I had my water skiing accident and was confined to a hospital bed, my medical card paid the hospital and doctors to put me back together, but it never, ever paid me my salary. That’s when I learned that the most important card to have in my wallet is my paycheck protection card—the card that shows I have disability insurance. That’s what paid me an income when I was unable to work.”
I’m sharing this story because I think Tom’s answer might be the same for most people, including you. So I want to challenge you to think about what would happen if you became sick or injured and unable to work? How long would you be able to make ends meet without your paycheck? In my case, the accident left me unable to earn an income for an extended period of time. I would have been in dire financial straits without the income that my disability insurance policy provided me. That’s why you need to protect your paycheck with disability insurance. Learn more at www.protectyourpaycheck.org then give us a call.
-John F Nichols – lifehappens.org
- In 2010, 43.6% of all U.S. residents 18 and older were unmarried—more than half of them women—while the elderly comprised 16.5% of all unmarried and single people 18 and older.
- 45% of households nationwide were maintained by unmarried men or women, while number of single parents living with their children in 2010 reached 11.7 million. (Almost a third of grandparents are raising their grandchildren.)
- There were 6.5 million unmarried-partner households, which included 581,300 same-sex couples.
- Finally, the number of people who lived alone totaled 31.4 million in 2010, comprising 27% of all households—up from 17% in 1970.
What does this mean to you? Well, if you fall into one of the above categories—a single parent or grandparent raising a child, an adult living alone, or an unmarried couple—you need to do a little “worst case scenario” thinking. Specifically: should you experience an illness or injury that results in a disability (temporary or permanent), what type of impact will that have not only on your finances, but also on anyone who depends on you?
During Disability Insurance Awareness Month, educate yourself about the reality of the impact a disability can have on your budget—and your life.
Disability coverage facts
If you think you have your bases covered with health insurance, worker’s compensation or Social Security, the following information might change your mind.
- While health insurance will cover medical-related expenses, it won’t provide an income to cover your needs if you are unable to work even for a relatively short period of time.
- Worker’s compensation coverage only comes into play if the disability is job-related—which only happens in about 5% of the cases, according to the Council for Disability Awareness. (If you’re playing the odds, you might want to reconsider, since 30% of those entering the workforce today will be disabled for three months or more during their career, with the average long-term disability claim lasts 31.2 months.)
- While Social Security provides coverage, qualifying for benefits can be challenging (60% are initially denied) and, at a little over $1,100 a month, the average monthly payment is barely above poverty level.
In the meantime, bills keep mounting up and your financial situation becomes even more precarious. According to one study, more than 62% of bankruptcies in 2007 were due to medical issues—a significant increase from the 2001 figure of 46.2%.
Fortunately, you do have several options to help safeguard yourself and those who depend on you. Employer-sponsored coverage (short-term disability insurance, long-term disability insurance, or both) can replace a significant percentage of your income—possibly up to 40% to 60% of your pre-tax income. (In a few states, employees can also purchase additional short-term disability coverage on their own, paid for through payroll deductions.)
If you are self-employed or want a stronger safety net, an individual disability insurance policy is the best choice. Start by calculating the amount of income you would need to maintain your current standard of living in the event you’re unable to work. Then, look at your life and work situation. Do you have children, a spouse or an elderly relative who depends on you for support? Is there a cap on the benefits available through your employer—and are you getting close to that level? Finally, has your standard of living increased or you have taken on a significant amount of new debt?
Once you have a clearer picture of your “worst case scenario,” schedule a meeting with your insurance advisor to review your disability insurance purchase options: through your employer, a professional organization or on your own. This will help you make the best decision for your budget, your future and those who are part of your “family unit.” For more disability information, visit www.protectyourpaycheck.org.