Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
Hey PCN, this article is
not designed to be preachy but allow me to share that we have 11 grandchildren
and we know that one day college (or trade school) is going to be a big
financial drag on them and their families.
To help with this future cost, a 529 plan is really a neat way to set
aside some monies now which can be a BIG help later. So all 11 of those little Sztanyo’s have a
529 and we contribute regularly to them.
Now to be honest, we are not “fully” funding their future expenses. In fact our contributions are rather
modest. But that said, a little put away
today can become a big deal down the road.
As we approach the year end I will run a number of articles that can
help with the annual “year in review” of your own financial plan. Today, this article is not for you
specifically, rather it is for your legacy. Those wonderful youngens called
grandkids, could live out their lives with a wonderful feeling of gratitude to
you. Most states offer fantastic plans,
however some are better than others, and remember you are not restricted to the
state in which you live to set this up. Take a look and give this some thought.
How To Set Up A College
Fund For Your Grandchildren, Even If They Aren't Born Yet
Worldwide Features /
Barcroft Images / Barcroft Media via Getty Images
If your kids are all grown up, you
may be starting to think about grandchildren. With the cost of college
continuing
to skyrocket, if you have the means, you may be trying to figure out
the best way to contribute to the cost of your grandchildren’s educations.
Odds are your children aren’t going to have kids all at the same time. Yet
the last thing you want is to fund an education account for the first
grandchild while you’re working (and have plenty of cash flow) and have others
come along later when you are retired and living off your nest egg (and money
is tight).
You want your grandchildren to feel loved and supported by you, no matter
where they fall in the birth order. Imagine being able to give each one of them
a gift of textbooks at the start of each semester, a laptop after they receive
their acceptance letters or a calculator or special tool they need for their
trade.
With
the Tax Cut and Jobs Act of 2017, you may also use these funds for up to
$10,000 per year for K - 12 tuition for private schools. Check with your
tax advisor since all
states
may not currently comply.
You can set up education funds for all of your grandchildren—even if they
aren’t born yet—with a simple workaround. Here’s how it works:
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You can set up a 529 plan for any US citizen (
or
green card holder) who has a
valid
U.S. Social Security number or taxpayer ID. There is a
special
feature in a 529 college savings plan that allows you to change the
beneficiary at any time
without
a tax consequence, as long as the new beneficiary is a family
member.
If the grandchild isn’t born yet, simply name your son or daughter as the
beneficiary and start funding the account. When a baby comes along sometime in
the future, change the beneficiary to be the child. Since the baby is a family
member, you can
change
the beneficiary to your new grandchild.
My grandfather used to give shares of stock to me every year, not while I
was in college but after I was married. Those shares helped me to buy my first
home, and, more importantly, learn to invest. The greatest part of the gift was
the conversation with my grandfather. We talked about what I was going to do
with the funds, how to invest them, and my goals.
Contributing to a 529 for your grandkids can be a great opportunity for
teaching them about money, saving, and your personal values. Also, it’s a
direct connection to what's going on in their lives. Young people are often
focused on their circle of friends, so having this deep connection with you is
important.
If you pass away, your adult child may take over the account in your
place. Simply name them as the
successor
owner when you establish the account. If they never end up having kids, no
worries. They can use it themselves for graduate school or trade school in
the future or
give
the funds to a relative (by changing the beneficiary.) Check with your
plan administrator when you set up the 529 plan.
Cashing in is also an option—they’ll just
pay
taxes on the earnings portion and incur a 10% penalty on that gain (similar to
an early IRA withdrawal). Check with your tax advisor as there may be
a state tax penalty.
Imagine having college savings accounts for each of your grandkids, all
funded today. What a wonderful gift for future generations.
I
write about living your richest life while transitioning to retirement, working
in retirement and personal finance. I firmly believe that we can have it all –
a rewarding career and fulfilling personal life while planning for retirement.
My life reflects this philosop...
Think
it's too late to save for retirement? Think again. Take my Late Starter's Retirement Catch Up
E-Course. Retire earlier even if you haven't saved a dime.
(As with any of these informative articles,
anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
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