529 Plan
With cost on the rise, the idea of paying for college at the time your kids enroll is increasingly difficult, especially for families that have more than one child. Moreover, many parents hope to avoid the need for their kids to get expensive student loans. Grants and scholarships are a good, yet unpredictable, option.
For these reasons, the 529 Plan can be ideal for families that want to proactively plan for college savings with mostly tax free funds.
The concept behind the 529 Plan is simple - save earlier and attempt to beat the inflation rate of college with tax free earnings, thereby significantly reducing the out of pocket costs.
529 plans are college savings plan that can offer significant income tax benefits. While contributions are not deductible on your federal tax return, most Michigan residents qualify for a state tax deduction if using a state sponsored plan such as the MI 529 Advisor plan through Allianz/Pimco or the direct plan sold through TIAA/CREF. The investment grows tax-deferred, and distributions to pay for the beneficiary's college costs are federally tax-free.
The donor (person funding or titled on the account) of the plan maintains control of the account. This allows the donor to make the decisions on investment selection, when and for what reasons withdrawals are made. Most plans even allow the donor to withdraw funds for personal use, no questions asked. (However, federal penalties may apply such as income tax treatment on earnings and an additional 10% penalty.)
Please fill out the request for paperwork section. We’ll call and help decipher if a 529 plan is right for you.
529 Plan
Michigan’s Three Sponsored 529 Plans
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•MET
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◦Prepaid tuition based on current average tuition of Michigan public colleges
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◦Maximum benefit paid is determined by where
beneficiary attends college -
•MESP
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◦Accumulation based on low cost investment approach
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◦Eligible expenses include most higher education expenses beyond just tuition
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•MI 529 Advisor Plan
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◦Accumulation based on multiple actively managed portfolios
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◦Eligible expenses include most higher education expenses beyond just tuition
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Similarities of all three plans
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•Offer state tax deduction for Michigan residents
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•Earnings are tax exempt for qualified expenses
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•Allow refund options for scholarships or grants
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•Has out of state college attendance provisions
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•Allow for multiple plans per beneficiary. Encouraging contributions by family or other people/institutions
Differences in prepaid vs. accumulation 529 plans
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•Accumulation plans are most diverse in how benefits can be applied
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•Prepaid plan benefits based on tuition (estimated 33% to 50%
of total actual college expenses) -
•Accumulation plans allow for the chance of market returns
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•Prepaid plan might offer greatest protection against loss
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•Accumulation plans risk that college inflation could exceed returns
Prepaid plan locks in tuition costs at Michigan public colleges.
Michigan’s Three Sponsored 529 Plans
JumpStart is a national organization dedicated to bringing financial literacy to schools. They believe good financial education is paramount to us succeeding as a nation, and that every child deserves a chance. James Studinger became the Vice Chair of the Michigan Coalition in 2009. Read more about JumpStart or check out their blog at www.mijumpstartcoalition.org>>
Contact Us For More Information
College Savings and Scholarship Links
JPStudinger Group l 100 W. Long Lake Suite 120 l Bloomfield Hills, MI 48304 l 248.643.6550
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529 Plan >>
James & Murray Feldman
There is no guarantee that the plan will grow to cover college expenses. In addition, depending upon the laws of your home state or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans may be available only if you invest in the home state's 529 college savings plan. Any state-based benefit offered with respect to a particular 529 college savings plan should be one of many appropriately weighted factors to be considered in making an investment decision. You should consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances and also may wish to contact your home state or any other 529 college savings plan to learn more about the features, benefits and limitations of that state's 529 college savings plan. You may also go to www.collegesavings.org for more information.
