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Do You Have a 529 Plan?

Do You Have a 529 Plan?

May 25, 2017

If you’re like me and have young children around, college probably seems ages away.

But, if you’re also like me, you may have swiftly realized how quickly time goes with kids and how fast they grow up. Regardless of whether they are four or fourteen, they will be applying for college before you know it! 

As we just celebrated National 529 College Savings Plan Awareness Day, ask yourself this question: Have you started saving for your child’s future education costs?

The Importance Of A College Education

A 2014 Pew Research Center study among Millennials shows that those with a Bachelor’s degree earned on average $45,500, while those with only a high school diploma earned a mere $28,000. If someone only had a high school diploma, they were almost four times more likely to be living in poverty than a college graduate (5.8% vs. 21.8%) and more than three times more likely to be unemployed (3.8% vs. 12.2%). (1)

These numbers are frightening when I think about the future of the younger generations. The problem is that it is no easy feat to achieve the necessary degree to set them on the path to success.

For the 2016-17 school year, the average cost of tuition and fees is sitting at $33,480 for a private university, $9,650 for state residents at public universities, and $24,930 for out-of-state residents attending public universities. (2) With these kinds of costs that keep increasing, a part-time or summer job just isn’t enough to pay the tuition bill.

529 College Savings Plan

So how can you save for college and invest in your children’s future? One excellent option is a 529 college savings plan. A 529 plan is a tax-advantaged savings plan sponsored by individual states. Here are some of the benefits a 529 plan offers:

Tax-Free Earnings

You do not have to pay taxes on earnings in a 529 as long as it is used for qualifying higher education costs. (3) There are no federal taxes due, and most states do not tax the earnings.

State Tax Deductions

Most states also offer additional state tax deductions for contributions made to their own state’s plan. As 529 plans are state-sponsored, you would need to check with your particular state to see what specific tax advantages they offer. For example, Minnesota does not provide a deduction, but taxpayers in Maryland may deduct $2,500 per account per beneficiary.

Anyone Can Contribute

Contributing to a 529 plan is not a privilege reserved for the parents of the beneficiary. Anyone can give towards the costs of higher education: grandparents, other family members, or friends.

Parental Control Of Funds

There is no need to worry about your teenager mishandling the funds because you, the parent, remain in control of the assets. The child that you are saving the money for is the named beneficiary of the account, but you are still the owner. They cannot bypass you to access the money.

Ready to Begin?

If you think a 529 plan might be a good idea for you and your family, I am here to help. I can explain all your 529 plan options and help you decide which is best for your individual college planning needs.

If you already have a 529 plan set up, it is important that you have an experienced professional managing the investments in your account. The investment allocation should line up with the age of your child, and the investment risk should be gradually reduced as the child gets closer to college.

Let me help you prepare for the future. With my guidance and expertise, you can start saving for your child’s future today so you can ease the worries of tomorrow. To get started, connect with me on LinkedIn, send me an email at, or call my office at (612) 746-2272.

About Ernest Draper

Ernest Draper is a financial advisor with more than 18 years of experience in the financial services industry. Specializing in innovative investment strategies and wealth preservation products, he works with affluent professionals, executives, and business owners. Along with his many years of experience as an advisor, Ernest is also certified as a Chartered Life Underwriter®, Chartered Financial Consultant®, Chartered Advisor for Senior Living®, and CERTIFIED FINANCIAL PLANNER™ professional. With these designations, Ernest has the advanced training and knowledge to understand complex planning strategies and techniques facing many successful people and their families. Based in Minneapolis, he is licensed to work with clients in Minnesota, Illinois, Wisconsin, Maryland, Washington D.C., Missouri, Texas, and Connecticut. To learn more, connect with Ernest on LinkedIn, email him at, or call his office at (612) 746-2272.

Ernest Draper, Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America ® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Foster Klima & Company, LLC is not an affiliate or subsidiary of PAS or Guardian. 2016-27665 (exp.08/18)®