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529 Savings Accounts are Confusing!

| September 30, 2018

Our last Kid’s Focused Words of Wisdom for September.

Studies show children who know they have a college savings account, no matter the amount of money saved, are almost 7 times more likely to attend college!

Why? It gives the child a belief they have a future.

529 Savings accounts can be confusing and the new tax law seems to have muddied the waters even more.

As of 1/1/2018 you can withdrawal up to $10,000/year from a child’s 529 account to pay for tuition of private, public or religious elementary, middle and high school. While this seems like a benefit, it can be detrimental to your college savings.

Typically, using funds from a 529 to pay for elementary, middle or high school is not the best solution for most families. Depositing and withdrawing funds from a 529 for private K-12 tuition should be used as a safety valve or for more advanced financial planning.

Why? Your investment time frame is shorter. 
• You are taking risk with money that will be invested for a shorter period of time and cannot withstand fluctuations in value. 
• You are cutting your nose off to spite your face. The benefit of the 529 is tax-free growth for a longer time frame. By withdrawing these funds early, you are missing out on the benefit of tax-free growth.

Create an EPPIC™ future for your child. Schedule your Free 15 Minute Call with Sharon to apply The EPPIC Method™ to help make the most efficient education funding decisions for your child/grandchild.

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Click here to read more Words of Wisdom.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.