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.

 

James & Murray Feldman on 
Fox News with Kids Savings Plan

 

 

History of the 529 Plan

On November 30th, 2009, Michigan officially unveiled its second MI 529 College Savings Plan. The new 529 Plan includes Michigan tax breaks and is sold by brokers.  Tim Melton, a State Representative from Pontiac first sponsored the change and hopes it drives more investment in the education of Michigan children. 

I had the opportunity to meet with Tim Melton back in the summer of 2007 during the early stages of the new plan’s development. The new 529 Plan had attractive attributes such as:

  • Utilizing the broker network and its broad reach to educate residents about the advantages 529 plans have to offer.
     
  • Now that 529 plans have been tested in the market place for a few years, we have the opportunity to search through managers with impressive track records.
     
  • It further encourages Michigan residents to invest within their own state for college savings.  Not only will they receive the tax breaks by using their resident state’s plan, now they will have two distinctly different investment styles  - passive or active management – to choose from.

After further research, I testified before the House of Representatives in support of the bill. The testimony went well, and the bill passed for a vote on the floor.  The bill was then evaluated by the Senate Finance Committee, and again I had the pleasure of supporting it.  After lengthy conversation, the time came for the bill to be voted upon and it was approved, all in favor! 

The following week I was invited to the Governor’s office for the official bill signing ceremony.  It was exciting to see the bill become law, and a great feeling of accomplishment for all of us who had been involved. I was impressed with the entire process, from Tim Melton’s undertaking of the bill then to the efficiency of getting it passed before the end of the year.

Next came the process of choosing the investment manager. I met with members of the state, including Robin Lott, Director of the Michigan Education Trust and Larry Steckleberg, Legislative Liaison for the Michigan Treasury. The goal was to present a list of possible platforms that would be welcomed by both advisors and Michigan residents. Much to my satisfaction, the state ended up settling on Allianz/Pimco. Bill Gross, the founder of Pimco Funds has the reputation for bonds that Warren Buffet has with stocks. Bonds are an integral part of a good 529 plan. 

I believe Michigan took a step in a great direction to offer residents a second college savings choice for their children or grandchildren.  There’s no doubt in my mind the new 529 plan will attract more participation in college savings accounts which will help pay for college expenses for generations to come.

 

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→

 

 

College Savings and Scholarship Links

misaves.com

setwithmet.com

mi529advisor.co

savingforcollege.com

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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.