Two in one day!
I’ve actually had these two topics sitting as drafts for a week now, but I’ve been busy with other things. Now that I have a touch of a free moment….
Financial planning is one of my hobbies. That and gardening. In many ways, they are quite similar. In both, you put something out of sight and watch it grow. The best gardens are maintained, clean, and watered. The best finances are watched carefully, added to, and left alone to grow. Each requires a certain amount of caretaking, patience, and attention. Each requires a certain amount of weeding to remove the bad (dead plants, weeds, debt). The best similarity of all is that each returns to the caretaker the benefits of the labor.
So it is no surprise that I have and actively use my employer’s 401(k), a savings account, a liquid asset account, credit, budget trackers, and so on. It is also no surprise that I do regular maintenance and check-ups on all my accounts (including loans) to see how and where we are going and to make sure we are still on track. To put it simply, I have a wide-spread financial garden, and while everything is still very much still in the seed stage, I’m actively weeding and watering.
One of the tools that I’ve discovered is the 529 Plan. Simply put, a 529 is a government-sponsored savings plan that lets you put money aside for college expenses. The money is post-tax, but it does carry many tax benefits that vary state to state. As long as the money is withdrawn for educational purposes (tuition, room and board, books, fees, etc.), the interest is tax and penalty free. If it is withdrawn for any other reason, you owe taxes and a penalty (typically 10% but it depends on your plan).
Utah provides the Utah Educational Savings Plan 529 (a.k.a. UESP 529). This plan has been consistently rated as the top plan in the nation. In fact, several financial experts go as far as to recommend that you not use your own state’s plan and subscribe to the UESP 529. As a non-resident, you will be charged a slightly higher fee for any maintenance, but that is still an improvement over the general value of many other state’s plans.
Some of the key benefits for Utah residents include the following:
- An annual tax deduction of up to $3240 per beneficiary if filing jointly.
- Gifting rights of up to $60,000 per beneficiary ($120,000 jointly) without applying tax penalties. This is an excellent way to move your estate to your heirs without Uncle Sam taking a huge chunk.
- Fee wavers for qualifying Utah residents.
- Extremely low fees for all Utah residents.
- One of the top performing portfolios in the nation.
Some of these benefits apply for non-residents. For more details, click the above link.
With all this talk of the collapse of Social Security going on, some have questioned how I can justify sending some of the money I would send to my own retirement towards the education of my children. After all, didn’t I pay for my own education with only limited help? Well, yes, I did. But education expenses keep going up, and if I can help my children gain an education without leaving school in debt (like I did), shouldn’t I do what I can?
I don’t regret for a minute that I paid for my own education; it made it more valuable to me. But I also recognize that education is the best and easiest way to help secure your future. In the words of Gordon B. Hinckley, “The world will largely pay you what it thinks you are worth.” Personally, I think my daughter is worth the world—I intend to help the world see it that way too.