It’s graduation season, and along with all the wonderful things a college degree comes with are also student loan debts. If you’re attending high school or college graduations, no one may be talking about it, but the graduates and their parents likely have the high cost of college on their minds. You might be writing a check or slipping a $20 into the graduate’s card if they are someone close to you, but what about your own family? You likely experienced or are experiencing the burden of paying for your child’s tuition and might be wondering how high tuition will rise by the time your grandchildren are 18. Considering the high cost of college tuition, giving the gift of education to your grandchildren could be the most generous thing you ever do.
College tuitions have been rising at a rate higher than that of inflation. There are 44 million student loan borrowers in the U.S. with a total of $1.5 trillion in debt. There’s not much you can do about this, but you can help to save for your grandchildren’s education – even if they don’t exist yet – using a 529 plan.
Once you contribute to a 529 plan, the funds can grow and be withdrawn tax-free for educational costs. Some states will give you a tax credit for putting money into a 529, and most states offer a tax deduction if you contribute to a 529 provided by that state. If your grandchild isn’t born yet, you can name your son or daughter as the account beneficiary. Then, if grandchildren come along later, you can name him or her the beneficiary instead. If you pass away, your adult child can take over the account and name their child as the beneficiary. If they do not end up having children, they or you can give the funds to any relative.
Contributing to a 529 plan can be a good way to pass on your values, as well as wealth. If you want to emphasize the importance of education and saving to your children and grandchildren, giving the gift of education with a 529 plan could be part of estate planning for your loved ones.
Here at O’Donnell Financial Group, we understand the importance of planning for the future. We can help you create a comprehensive retirement plan that includes an estate and legacy plan. Click here to schedule your complimentary financial review today.