today I’m gonna talk about the 529
college savings plan explained so I’m gonna go through some of the major
points of the 529 plan things that I think are important to give you a good
understanding of how you can use the 529 plan for your son or daughter, grandchild or whichever beneficiary you choose for their 529 college
savings plan I’m also gonna talk about one particular point that I don’t think
it’s talked about enough and I think it’s a huge risk of the 529
plans and I’m also gonna make another video specifically talking about this
issue if this is your first time watching these videos or you haven’t
subscribed yet be sure to click on the bell at the bottom and subscribe today my name is Travis Sickle CERTIFIED FINANCIAL PLANNER with Sickle Hunter Financial Advisors The 529 college savings plan let’s get right into how it
works so these are dollars that get invested in after-tax dollars into an
investment account grow tax-deferred and if they’re used for college education or
K through 12 they come out tax-free when you’re thinking of the529
plans think of them just like a Roth IRA these go in after tax dollars the same
way that a Roth IRA does they’re gonna grow tax-deferred and then they’re gonna
come out tax-free as long as they’re used for a qualified expense so the Roth
IRA is for retirement the five to nine plan is going to be for college
education expenses and again when I say college education expenses I’m also
talking about K through 12 so any of those school related expenses you can
use a 529 plan for The 529 plans or the 529 plans are state
sponsored plans they’re set up state by state but that doesn’t mean you’re
limited only to your state’s 529 plan you can actually look at other states to
see if they have a better 529 plan when you’re looking at which is a
better 529 plan you’re looking at the actual investments so the
investment choices inside these 529 plans are typically mutual fund
type of investments and you’ll be able to choose
some of the options with inside those plans so you can kind of construct your
own portfolio there are also portfolios designed with
a specific target date in mind when you’re comparing the 529 plans
it’s going to come down to the investment choices that you have inside
that plan which traditionally are mutual fund style investments now some of them
you’re gonna be able to construct your own portfolio so if you really want to
get into the weeds of it you can build your own portfolio or you can choose a
target date style fund which will either show you the age of your child currently
or the target on which the money is going to be used so those are target
date funds so the idea behind them is they’re gonna be a mix of equities or
stocks and bonds so the closer we get to that target date it’s gonna have more
bonds than equities inside of that plan which will gear it towards their risk
tolerance for that particular goal another point of the 529 plan
is the ability to transfer to another beneficiary so if you have multiple kids
and your oldest is in school and they don’t use all the money you can actually
trickle that down to another beneficiary or you can actually give it to another
family member another niece or another nephew
so there’s a lot of flexibility in transferring the 529 plan and
if if you have multiple kids in school at the same time if you have twins or
triplets then you can actually take that money in certain plans and transfer it
in the same year so you don’t necessarily need to have multiple 529 plans or multiple accounts when you’re planning you can have those
assets in a 529 plan and then transfer it to another 529 plan
now you can’t have two beneficiaries on the same 529 plan so you will
eventually, have to open up a separate 529 plan count and those
those rules are based on the individual plan so be sure to check with whatever
plan that you’re going with on their transfer rules I know for the state of
Florida you can actually take the assets from one 529 plan and transfer
it into another 529 plan with the state of Florida as many times as
you want throughout the course of the year the 529 save
plan limits the contribution limits the amount that you could put into the plan
according to the IRS or only the amount that you can fund for a college
education so there’s no actual number on it
but if you don’t use those dollars for college education not only are you gonna
have income taxes but then you’re also gonna have a ten percent penalty so you
don’t want to over fund the five to nine savings plans and you also want to
consider the gift tax consequences currently in 2018 that’s 15,000 per
beneficiary so it’s another consideration you might want to spread
out your contributions over a set amount of years when you’re planning for
college education one of the biggest risks I see of the 529 savings
plans are the bond funds that are inside of these plans and a lot of these
target-date funds will shift more into bonds or bond funds specifically in
these plans to make you believe that they’re being more conservative in their
investments and that money will be there but bond funds can lose money and their
positions such as bonds which adds another layer of risk when you’re
looking at a bond fund versus an individual bond it’s such a big deal I’m
gonna do another video on it to really explain and give you some data to back
it up on what you should really look at when
you’re looking at these five to nine plans and is it really worth it to
invest in a 529 savings plan so if I haven’t already I’ll post a link up
at the top you can click on it we can get a little bit more in-depth on the
five to nine savings plan an investment portion to it and the risks that are not
talked about enough in a 529 savings plan again as soon as the video
is posted I’ll post the link at the top if it’s not there already right here
just click on it I’ll go in a little bit more into depth if you’ve enjoyed this
video be sure to subscribe and leave your comments down at the bottom