Category Archives: 529 Plans

Can You Use a Roth IRA for College? Should You?

Today’s post is written by a fellow fee-only advisor, Greg Phelps, CFP®, CLU®, AIF®, AAMS®, of Redrock Wealth Management

Saving for a child’s college education is perhaps one of the most noble things a parent will ever do. It’s also one of the toughest financial goals to tackle, because similar to healthcare costs, college expenses have risen across the board at 5% per year. Continue reading Can You Use a Roth IRA for College? Should You?

Planning for College Cash Flow

Before you sign up, you have to figure out how you’re going to pay for college each year. The first step in figuring that out is confirming with the school what has to happen for your aid package to be renewed. Then, consider the additional costs that aren’t included in the award letter—travel to and from school, activities your student intends to participate in, spending money. With all of those items written down, you have a good sense of what you’ll actually spend each year. This may seem really elementary, but most Continue reading Planning for College Cash Flow

How America Pays for College

Sallie Mae’s annual How America Pays for College report has some good news: In the 2015-2016 school year, the average amount families spent on college went down slightly, to $23,688. The biggest decline came on spending for 2-year colleges; families with students in 4-year schools reported spending about the same as in the previous year. In Continue reading How America Pays for College

Rebalancing 529 Accounts

You can rebalance your 529 plan account twice a year. Just because you can, should you? If you’re in an age-based investment option, you don’t need to rebalance to maintain the correct asset allocation. That’s what an age-based strategy does for you. Those who select their own funds should rebalance, especially since your allocation has probably become Continue reading Rebalancing 529 Accounts

PATH Act and 529s

The PATH Act that went into effect in 2015 includes several changes pertinent to 529 plans. The big ones:

  • Computers, peripherals and Internet access are now qualified expenses. So add any money spent on those to what’s on your 1098-t.
  • People with multiple 529 accounts no longer need to aggregate them to determine how much is taxable earnings in the event of an excess withdrawal. Instead a single account can be used for that, as long as funds were withdrawn from that account.
  • In the event you receive a refund from a college– for example, you withdraw from a class– you can now redeposit that refund in the 529 account within 60 days for no penalty.

Continue reading PATH Act and 529s

Education Tax Credits

If your income is less than $180,000 (married filer) or $90,000 (single), you may be eligible for the American Opportunity Tax Credit while your student is in college. This is a credit of up to $2,500 annually, so nothing to sneeze at. Here’s the catch: You can only take the credit for expenses for which you did not use another tax benefit (i.e., for expenses paid Continue reading Education Tax Credits

Student Income and Assets on the FAFSA

There are four components of EFC: parent income and assets, and student income and assets. Each is assessed slightly differently in the formulas. Since parents generally have substantially more income and assets than students, their portion of the EFC gets considerably more attention. Let’s look at the student side because it can cause Continue reading Student Income and Assets on the FAFSA

How do you Reduce Assets on the FAFSA?

The FAFSA’s asset protection allowance is pretty low– about $19,000 for married parents or $11,000 for single parents, and zero for students. (See page 19 here for exact amounts.) What goes in that? For most people, the biggest ones are any non-retirement savings accounts including 529 plan accounts, the balance in your checking account and the net Continue reading How do you Reduce Assets on the FAFSA?