Funding a College Education

Rather than looking at the cost of college as a big-ticket expense, think of it as an investment. According to the Social Security Administration, men with bachelor’s degrees earn approximately $900,000 more in median lifetime earnings than high school graduates. What’s more, women with bachelor’s degrees earn $630,000 more, men with graduate degrees earn $1.5 million more, and women with graduate degrees earn $1.1 million more.

At Barnum, we recognize that a good education provides more than just a diploma or degree; it is the foundation of a solid future. Let us help you.

Flexible, tax-advantaged accounts designed specifically to pay for qualified education expenses.

529 plans are state tuition savings programs that enable you to save money on a tax-deferred basis to fund future college and graduate school expenses on behalf of a beneficiary, like a child or grandchild. They’re administered by mutual fund companies and give you the choice to select an age-based option which automatically adjusts the asset allocation mix as your child nears college age or a fixed portfolio that follows a set investment strategy based on your goals and risk tolerance. There are no annual limits on how much you can contribute to a 529 plan. However, contributions count as gifts for gift-tax purposes. For 2021, individuals can contribute up to $15,000 per beneficiary ($30,000 for gifts from a married couple) without using up part of their lifetime gift tax exemption or having to pay gift taxes. Withdrawals must be used toward qualified education expenses, such as tuition, room, and books, or they incur federal income tax and an additional 10% penalty. Unlike a custodial account which eventually transfers ownership to the child, the account owner of a 529 plan keeps control of how the money is spent. They can also transfer unused money to another named beneficiary. Like most things in life, the sooner you start the longer you have to take advantage of the tax-deferred growth a 529 savings plan offers. You can fund the account with a lump sum contribution and/or make regular systematic contributions to take advantage of dollar cost averaging. Disclosure: 529 Plans allow contributions to a state-sponsored plan for higher education expenses. Owner may change the beneficiary of the account to another eligible family member of the original beneficiary. Section 529 plans are authorized under IRC § 529 and are sponsored by the individual states. Some states may offer preferential state tax treatment if certain conditions are met. Contributions grow tax-deferred and qualified withdrawals are federal income tax-free. Gifts to a 529 plan qualify for the annual gift tax exclusion ($15,000 in 2021). Annual exclusion gifts to a 529 plan can also be non-loaded for a period up to 5 years. Taxable withdrawals may avoid the additional 10% penalty tax if they occur on account of death, disability, or receipt of scholarship.

Flexible, tax-advantaged accounts designed specifically to pay for qualified education expenses.

529 plans are state tuition savings programs that enable you to save money on a tax-deferred basis to fund future college and graduate school expenses on behalf of a beneficiary, like a child or grandchild. They’re administered by mutual fund companies and give you the choice to select an age-based option which automatically adjusts the asset allocation mix as your child nears college age or a fixed portfolio that follows a set investment strategy based on your goals and risk tolerance.

There are no annual limits on how much you can contribute to a 529 plan. However, contributions count as gifts for gift-tax purposes. For 2021, individuals can contribute up to $15,000 per beneficiary ($30,000 for gifts from a married couple) without using up part of their lifetime gift tax exemption or having to pay gift taxes.

Withdrawals must be used toward qualified education expenses, such as tuition, room, and books, or they incur federal income tax and an additional 10% penalty.

Unlike a custodial account which eventually transfers ownership to the child, the account owner of a 529 plan keeps control of how the money is spent. They can also transfer unused money to another named beneficiary.

Like most things in life, the sooner you start the longer you have to take advantage of the tax-deferred growth a 529 savings plan offers. You can fund the account with a lump sum contribution and/or make regular systematic contributions to take advantage of dollar cost averaging.

Disclosure: 529 Plans allow contributions to a state-sponsored plan for higher education expenses. Owner may change the beneficiary of the account to another eligible family member of the original beneficiary. Section 529 plans are authorized under IRC § 529 and are sponsored by the individual states. Some states may offer preferential state tax treatment if certain conditions are met. Contributions grow tax-deferred and qualified withdrawals are federal income tax-free. Gifts to a 529 plan qualify for the annual gift tax exclusion ($15,000 in 2021). Annual exclusion gifts to a 529 plan can also be non-loaded for a period up to 5 years. Taxable withdrawals may avoid the additional 10% penalty tax if they occur on account of death, disability, or receipt of scholarship.

Representatives do not provide tax and/or legal advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.

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