Words of Advice for Parents (and Grandparents)

By CB Mason

The addition of Baby Sherwood and the upcoming graduation of my own youngest child from high school has got me thinking about reaching financial goals beyond just planning for retirement. My common word of advice to Tom and Rose (and all new parents) is to do all the things. If your kiddo asks you to play cars or wants to "cook" for you, say yes. If he is walking down the hall, just grab him and give him a big hug "just because." If there is a game or recital or tournament or performance, stop what you are doing and be there – even if "there" is your living room. Because before you know it, they are off to college. I know people told me this advice when my babes were snuggly little bundles in my arms. I hope I did this, but now I wonder if I did it enough…

I know for sure one thing I did not do enough was add to the college savings accounts. Man, college is expensive! So that is my other advice to Tom and Rose, start Baby Sherwood's college savings account like RIGHT NOW. And add to it regularly. 

Which I know they are doing, for both Henry and big brother Charlie too. Through Headwater Investments, we can open college savings accounts for our clients – grandparents can do this too! As a grandparent, you can open an account and take advantage of the tax benefits of funding each year, up to the full amount allowed by the law and based on your tax situation. Then when the grandkids get to college, simply send a check to the institution of their choice. Your kids will appreciate your thoughtfulness and generosity.

What is a 529 College Saving Plan? According to the SEC, a 529 plan is "a tax-advantaged savings plan designed to encourage saving for future education costs."[1] These plans can be sponsored by states, state agencies, or educational institutions. Similar to a ROTH IRA, you are investing after-tax contributions in mutual funds or similar investments.

The benefits of a 529 College Savings Account:

• Tax-deferred growth and withdrawals for qualified educational expenses may be free from both federal and state income tax payments.
• Depending on the state in which you live, you may also be eligible for state income tax deductions or tax credits for your contribution to a 529 plan.
• Contribute up to $75,000 ($150,000 per married couple) per beneficiary for a single year without eating into your lifetime gift-tax exclusion.
• Funds can be used for a wide range of educational expenses at any qualified college nationwide, including college tuition, books, fees, and room & board.  Funds may also be used for K-12 tuition, certain apprenticeship costs, and even student loan repayments.
• Account owner maintains ownership of the funds until the money is withdrawn – this means you can re-assign beneficiaries to another qualified family member should one child not use all the funds (or even use the funds for educational expenses for you).

May is 529 Awareness Month, so it's the perfect time to find out more. If you are interested in learning more about how it works or how to start a 529 College Savings Plan for your child or grandchild, then give our office a call.