By coinnews 
00:00 Speaker A
This week on wealth, we’re breaking down one of the most useful savings accounts around, a 529 plan. 529 plans are a type of investment account that can be used for higher education savings and they’re usually sponsored by states. And they are so powerful because of the tax savings. Your earnings grow federally, tax deferred and qualified withdrawals are tax-free among other benefits. Here to help us review some of the basics. We’ve got Jennifer Hollers, LPLL financial, senior vice president and head of High Net Worth Planning Services. Jennifer, good to have you here with us. So how do you go about choosing a 529 plan?
01:12 Jennifer Hollers
Well, first of all, 529 plans can be chosen by state, but you’re not restricted to your state. So it’s really more about the 529 plan that works for you and your family.
01:43 Speaker A
Okay. And so how do you figure out how much to save?
02:02 Jennifer Hollers
Strategies in regard to saving, I think the first and best strategy is saving early and saving often. So an individual can actually contribute 19,000 a year for tax purposes to a 529 plan. Married couples can save up to 38,000 a year in a 529 plan. And so those are some amounts you want to consider potentially putting into the plan. But depending on where your child goes to school, whether it’s private or public, you want to think about the amount you want to save in those plans.
03:31 Speaker A
And so as you’re managing the accounts throughout your child’s life, what is that process like? How do you plan effectively for managing the account?
03:59 Jennifer Hollers
Sure. Well, I think an interesting component to 529 plans is that recently there’s been an expansion in what you can save for. So historically, 529 plans have been for college expenses, but now in recent years, legislation has opened it up to K through 12, actually funding school loans or paying back school loans up to 10,000, and then also converting to a roth, if you have leftover funds up to 35,000 a year. So that’s pretty compelling in regard to what 529 plans can be used for beyond college expenses.
05:02 Speaker A
So what about when it’s time to withdraw from this account? How do you go about that?
05:15 Jennifer Hollers
So qualified withdrawals are best used for school tuition, books, supplies, and room and board. And an interesting piece about room and board is that can actually pay for off campus and or living with family, with certain restrictions around it in calculations. But typically, you want to look at the cost of education to the school that your kiddo’s going to, and you could potentially even withdraw qualified, as a qualified, um, for, for, for living with family.
06:41 Speaker A
Now, I know that you focus on high net worth planning as well. So how are higher net worth folks thinking about funding a 529?
07:03 Jennifer Hollers
Sure. So there’s something called super funding that we have found high net worth families tend to be very interested in. And so, back to that 19,000 per individual contribution a year for tax gift, or gift tax exclusion. If you want to continually super fund, then you could actually give 38,000 per married couple into the 529 plan and five X that. So that’s 190,000 in 2025. And we’ve seen a lot of high net worth families that superfund early, let it grow over time, and potentially even use it for education purposes for next generation, cousins, grandchildren. And that’s one way that we’ve seen high net worth families really look into the 529 plan strategy.
08:35 Speaker A
And so how do you balance saving in a 529 versus some of your other goals, like saving for retirement?
08:50 Jennifer Hollers
So I’m actually a sandwich generation. So I’ve got retirement priorities that I’m looking to, got aging parents that I’m concerned about in regard to their care and funding of their care. So it’s really about looking at your strategies and prioritizing the most important ones. So education can be paid for many different ways. It can be funded in from cash flow that year, uh, school loans, 529 plans. Typically, retirement is going to be funded through Social Security, potentially, and how, what we’ve saved. So you want to prioritize retirement first, education savings second, and then really assess what it is in your family and parents, aging parents, that you might need to fund later. But it’s really about prioritizing and continuing to fund, like I said, early and often.
10:04 Speaker A
Jennifer, thanks so much for taking the time here with us today. Appreciate the advice.
10:11 Jennifer Hollers
Thank you.