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529 Plan Basics Feat. Heather Manley from Ninja Duds

By August 6, 2024September 12th, 2024No Comments

529 Plan Basics Feat. Heather Manley from Ninja Duds

Welcome to another episode of Not Just Numbers: Honest Conversations with a Financial Advisor and Lawyer. In episode 22 , Madison Demora and Mike Garry dive into the basics of 529 plans with special guest Heather Manley from Ninja Duds.

Introduction

In this episode, we cover everything you need to know about 529 plans, how they work, and their benefits. We also have a special guest, Heather Manley from Ninja Duds, who shares her insights and experiences.

Hosts

  • Madison Demora: Podcast producer and co-host.
  • Mike Garry: Financial advisor, CFP®️, founder and CEO of Yardley Wealth Management, and estate planning lawyer at Yardley Estate Planning.

Special Guest

  • Heather Manley: Founder of Ninja Duds, a local consignment business.

What is a 529 Plan?

A 529 plan is a savings plan designed to encourage saving for future education costs. It comes in two types:

  • Education Savings Plan: Allows for investment in mutual funds or cash, with tax-free earnings if used for qualified education expenses.
  • Prepaid Tuition Plan: Lets you pay for future tuition at today’s rates, typically for state schools.

Differences Between Education Savings Plans and Prepaid Tuition Plans

The key differences between the two types of 529 plans are:

  • Education Savings Plans: Open an account through states or state agencies, invest money in mutual funds or cash, and enjoy tax-free earnings if used for education.
  • Prepaid Tuition Plans: Buy credits at today’s prices for future tuition, usually for state schools within the state.

Purpose of 529 Plans

529 plans were created to encourage saving for college by offering tax benefits. They can save families significant amounts in taxes compared to other investment options.

Starting a 529 Plan

Parents should start a 529 plan as early as possible, ideally right after the child is born and has a Social Security number. Early savings allow for more time to compound and grow.

Mechanics of 529 Plans

To start a 529 plan, open an account with a state plan, choose investments, and make contributions. Withdrawals are tax-free if used for qualified education expenses. The account owner can set up automatic contributions and receive additional contributions from family and friends.

Transferring 529 Plans

You can transfer a 529 plan to another state once every twelve months. This allows flexibility if you find a better plan in a different state.

Comparing 529 Plans

Use websites like Saving for College to compare plans based on costs, fund choices, and state tax benefits. Look for plans with low fees and good investment options.

Tax Advantages of 529 Plans

Contributions to 529 plans grow tax-free, and withdrawals for qualified education expenses are not taxed. This offers significant tax savings compared to other investment accounts.

Age-Based Portfolios

Many 529 plans offer age-based portfolios that automatically adjust the investment mix as the child grows older. These portfolios become less aggressive as college approaches, reducing the risk of market downturns impacting college savings.

Secure Act 2.0 Changes

Starting in 2024, leftover funds in a 529 plan can be rolled over into a Roth IRA for the beneficiary, up to $35,000. This offers additional tax advantages and flexibility for families.

Other Financial Strategies for Generational Wealth

Besides 529 plans, families should consider other investment options like stocks, ETFs, and mutual funds to build and protect generational wealth. Diversifying investments helps mitigate risks and increase potential returns.

Guest Insights: Heather Manley from Ninja Duds

Heather Manley shares her journey of starting Ninja Duds, a local consignment business, and how it has evolved over the years. She highlights the importance of flexibility, community, and adapting to changes in business.

Conclusion

529 plans are a powerful tool for saving for education while enjoying tax benefits. Starting early, choosing the right plan, and understanding the tax advantages can help families build a strong financial foundation for their children’s future. For more information contact us!

Table of Contents

Michael Garry Yardley Wealth Management

Author Michael Garry Yardley Wealth Management

Michael Garry is a CERTIFIED FINANCIAL PLANNER™ practitioner and a NAPFA-registered Financial Advisor. He is a member of the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA).

More posts by Michael Garry Yardley Wealth Management