...the argument for setting aside money now in 529 plans is stronger than ever.
Pittsford, NY (PRWEB) November 30, 2011
Citing “near-perfect” conditions, Savingforcollege.com, an independent source of 529-plan data, publications, and ratings since 1999, has released a list of six reasons why the current environment is especially good for parents, grandparents, and financial advisors to consider or recommend 529 plans for college savings. Savingforcollege.com is owned and operated by Pittsford, NY-based JFH Innovative LLC.
“While we recognize that many families are dealing with multiple financial challenges alongside economic uncertainty and market volatility, the argument for setting aside money now in 529 plans is stronger than ever,” says Joe Hurley, founder of Savingforcollege.com. “Most parents who make the commitment will, we believe, be glad they did so when they look back years from now.”
The six reasons why conditions are right for 529 plans are as follows:
1. If economic conditions improve over time, as many expect, there is a very good chance that investments made now in age-appropriate portfolios will in fact keep pace with future tuition increases at many schools.
2. The top tax rates are slated to move higher. Within the next two years, many parents may see their taxes on interest, dividends, and capital gains increase by a substantial amount, making the benefits of a tax-advantaged 529 plan even more compelling.
3. With student loans becoming more expensive and state aid dwindling, 529 plans become even more critical in financing a college degree. The fact that 529 plans have certain advantages in the federal financial-aid formula will end up helping families who use 529 plans instead of taxable investments.
4. In spite of their budget problems, no states have cut back on their deductions for contributions to a 529 plan. How long will this situation last? Parents may want to take advantage of their state-level benefits while they still exist.
5. The IRS may soon impose new restrictions on 529 plans to police against the possibility of tax abuse. Accounts opened now may possibly be exempted from certain restrictions under “grandfathering” rules.
6. With all the uncertainty surrounding estate and gift taxes, high net worth individuals have a unique opportunity to hedge their bets with 529 plans. Contributions to a 529 plan are removed from one’s gross estate, yet remain under the contributor’s full control. The high contribution limits in 529 plans, coupled with the temporary $5 million lifetime gifting exemption, can lead to a significant reduction in estate tax exposure.