College is expensive, and tuition and fees seem to rise every year. Fortunately, financial planning for military families with AAFMAA Wealth Management & Trust LLC (AWM&T) will help you explore how 529 savings plans can fund your family’s education for multiple generations.
The average total cost of attendance at a four-year public university is $29,080 for in-state students and $39,059 for out-of-state students. For four-year private universities, the average total cost of attending jumps to $45,284.
A key part of financial planning for military families involves developing strategies to pay for college for future generations. One of those strategies is often a 529 plan. Take a closer look at these plans and the role military financial planning plays in the process.
What Is a 529 Plan?
A 529 plan is a tax-advantaged savings plan designed to help fund your child’s education. Initially, the savings plan was intended to cover costs for college, graduate school, and vocational school. It has since been expanded to pay for qualified K-12 and apprenticeship programs.
Understanding 529 Plans
All states and the District of Columbia administer 529 plans. You can own a 529 plan in another state, which is convenient for military families who relocate every few years, and you can own more than one 529 plan. If you need help weighing your choices, AWM&T’s financial planning for military Veterans and families can assist you.
The money you save in a 529 plan grows tax-deferred. You also get a federal and state tax break when you withdraw the money for qualified education expenses.
When withdrawn, the money can be used to pay for such education expenses as:
- Tuition, room and board, books, supplies, a computer, internet
- $10,000 per year for elementary and secondary school tuition
- Fees, books, supplies, and equipment for apprenticeship programs
- $10,000 in student loan repayment per borrower
You also can roll over up to $18,000 — the gift tax exclusion for 2024 — to an ABLE account, a tax-advantaged savings account for disabled individuals and their families. Alternatively, you can roll over up to $35,000 (lifetime) to a Roth IRA for the beneficiary of the 529 plan. Military financial planning with AWM&T can assist you in deciding your best route.
Types of 529 Plans
There are two types of 529 plans: education savings plan and prepaid tuition. Both plans allow your savings to grow tax-deferred and be withdrawn tax-free if used for qualified educational costs.
Prepaid plans are available in only a few states and typically have limited investment options. A prepaid plan allows you to lock in today’s cost of tuition, which can be a big savings, but you are limited to attending in-state public schools.
Education savings plans allow you to choose your investments based on your time horizon. The money can be spent at all qualified postsecondary schools, usually with no residency requirement.
Financial planning for military Veterans and families at AWM&T can guide you in finding a 529 plan for your situation.
Dynasty 529s
If you’re looking to pay for multiple generations, 529 plans are a good vehicle to consider. Unlike other tax-advantaged savings plans, 529 plans have no annual contribution limits. Instead, they have total contribution limits set by states, but no limit on how large the account can grow.
The keys are that your plan must allow changes in the beneficiary and account owner to permit future generations to use the funds. You can contribute up to $18,000 ($36,000 for a couple) each year. Additionally, you can avoid the gift tax or supercharge the account by contributing five years’ worth of the gift exclusion ($90,000 for an individual or $180,000 per couple) allowing your money to take advantage of compounding.
If you think a multigenerational 529 may fit your goals, speak to a military financial planning professional to find a plan that’s right for your family.
Learn How Financial Planning for Military Families Can Help You
Do you want to explore 529 plan options for the next generation? AWM&T offers comprehensive financial planning for military families and can help you safeguard their future.
AWM&T exclusively serves military families just like yours, delivering wealth management solutions and specialized financial planning you need and deserve. To get in touch, call 1-910-307-3500 or click here to speak to a professional. Or learn more about us and your options on our website.
About AWM&T
AWM&T was created in 2012 to meet the financial needs of military families. We provide experienced, trustworthy, long-range financial planning, investment management, and trust administration services to support financial independence and security. We aim to be the premier provider of fiduciary services by always working for AAFMAA Members’ best interests.
We are proud to share the mission, vision, and values of AAFMAA, our parent company, consistently building on AAFMAA’s rich history and tradition to provide Members with a source of compassion, trust, and protection. Through AAFMAA’s long-standing legacy and our financial expertise, AWM&T is honored to provide personalized wealth management services to military families across generations.
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