Do you dream of sending your kids to a traditional four-year university? Is there a chance they might want to pursue a trade? What about a degree at a local community college? Many parents wonder, How can I help set up my child for success? And furthermore, How can I begin to guess what life after high school might look like for my kids in the coming years?
Rising tuition costs coupled with the student loan debt crisis may deter individuals from pursuing higher education. For example, recent data from the National Student Clearinghouse indicates U.S. colleges and universities have seen historic enrollment decline. Because of this, the future of higher education is unknown, but luckily there is no single pathway to academic and professional success.
One approach to helping your children achieve that success is investing in a 529 savings plan. A flexible 529 savings plan can accommodate your child’s personal dreams and professional goals, no matter the direction they choose – whether it’s two years from now or twenty.
You can use the money invested in a 529 at in-state, out-of-state, public, or private schools, as well as community colleges, trade schools, graduate programs, some international schools, K-12 tuition, registered apprenticeship programs, certification programs, and certain student loan repayment. Starting in 2024, unused funds from a 529 account can roll over to a Roth individual retirement account (IRA) in the account beneficiary’s name without incurring tax penalties.
How to Save and When to Start?
It’s never too early or too late to start saving. While babies and younger children will have more time for their investments to grow in a 529 plan, families with older students can still take advantage of federal and state tax benefits. There are no age requirements for a 529 plan.
And a 529 plan can fit any budget. You can start small and save big in the long term. For example, you can open a 529 account with as little as $10 and save at your own pace. Small, regular contributions can add up. One successful strategy is to set up automatic monthly contributions through your bank or banking app, so you do not have to worry about it from month to month.
Because no one really knows what the future holds for students, most 529 savings plans offer tools to help you explore future education costs and plan your savings strategy. Calculators are available at virginia529.com to help research how much you will need to save by your child’s high school graduation date, help determine your financial aid eligibility, and review what the cost of waiting would be if you are still considering whether to open a 529 account.
Additionally, earnings on the savings in 529 accounts are free from state and federal taxes when used for qualified education expenses. Virginia taxpayers enjoy an additional benefit when saving with a 529 plan: a state individual income-tax deduction of up to $4,000 per account per year.
Your Investment Is Safe and Protected
A 529 account works much like a Roth IRA by investing your after-tax contributions into investment portfolios like a mutual fund. There are many safe-investment options for 529 plans that can handle market turbulence and provide peace of mind for families.
For example, an FDIC-insured account is backed by the full faith and credit of the U.S. Government. Balances in Invest529’s FDIC-insured portfolio are insured by the FDIC up to $250,000 for all eligible accounts for each account owner, the maximum amount currently allowed by federal law. With a current effective rate of 4.49 percent, a 529 plan in Virginia offers the highest return among FDIC-insured portfolios in the industry.
There are plans designed just for Virginians. Exclusive to Virginia residents, the Tuition Track Portfolio is designed to track the average tuition growth at Virginia public universities (average tuition) and protect families’ savings by avoiding any market risk. Families can use units toward tuition, as well as expenses that accompany higher education (such as housing). For every 100 units purchased, families will receive the value equal to one year of average tuition when their student attends college.
No matter where you live, the age of your child, or your family’s income or saving goals, you can find the right investment fit for your family with a 529 plan.