Since we plan to pay for our three year old's college education, we continue to make contributions to a 529 plan, even though we retired in our forties. Since our state allows deduction of 529 contributions for tax purposes, we typically add an amount equal the maximum deduction allowed. However, when we first opened the account, we learned that we could maximize tax deductible contributions by also opening a 529 account for my spouse and me. This works because the 529 account funds can be transferred to a different beneficiary, who is also a family member, at any time. Thus, in the future, we can combine all three accounts for my daughter's use.
Of course, 529 plans already offer tax exempt earnings when used for higher education expenses. The flexibility to transfer beneficiaries provides us several additional benefits:
Since we are in the process of adopting a second child, we will consider the option of pre-funding a 529 account when the adoption date is set.
For more on Crossing Generations , check back every Thursday for a new segment.
This is not financial or tax advice. Please consult a professional advisor.
Copyright © 2008 Achievement Catalyst, LLC
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