On Boundless Dreams with New York’s 529 College Savings Program

College savings with kids and a piggy bank and money

Thank you NY 529 for sponsoring this post. It’s never too early to get growing! Learn more about opening an NY 529 Plan for your child today.

Thirteen whole years. My oldest kiddo (my baby!) recently became a teen and so here I am, once again, feeling like these are the sort of milestones that scream time is indeed a thief. I’m certain that it was just yesterday that my daughter was born. Then I blinked, and also just yesterday, I was buying supplies to bake a birthday cake for a milestone celebration.

That said, time is also on our side. A little bit can go a long way when it comes to things like saving for higher education. Even amidst uncertain times, long-term goals are still very much alive. As a parent, and a keeper of my children’s boundless dreams and goals, I know that turbulent times (hello 2020!) are just a moment in time – and we can’t, in any way, forget the future ahead. Times like this also remind me that solid savings vehicles are incredibly important. For college savings, both of my kids have New York’s 529 College Savings Program Direct Plan, accounts which I believe are the right fit for my family. I’ve broken down the important stuff below: 

What is a New York 529 Plan? 

The NY 529 college savings plan is a state-sponsored investment account for higher education savings. It can be used to pay for four- or two-year colleges, postsecondary vocational and trade schools, and postgraduate programs. This also includes many things that are considered a higher educational expense – including tuition, books, supplies, software, room and board, equipment (like computers, etc.), and more.

Why NY 529 vs. Traditional Savings? 

Hello, tax savings! An NY 529 plan allows earnings to grow tax-deferred, and qualified withdrawals are tax-free*. Also, most institutions only count around 6 percent of the total 529 funds as usable when determining financial aid eligibility. In comparison, approximately 20 percent or more of traditional savings custodial accounts are factored into the eligibility of financial assistance. This is just the cliff notes, learn more about the calculation at https://studentaid.gov/complete-aid-process/how-calculated.

reflection photo in a puddle

What if I lose my job or face financial hardship? How can my family possibly do this while saving for retirement, a home, etc.? 

One of the things that I appreciate most about our 529 accounts is the flexibility and investment options. There are times when I’ve had the accounts set to recurring contributions (also known as an automatic investment plan, or AIP), and there are times when contributing individually was a better fit. Even small, regular contributions today can make a difference over time. I know that staying the course and making adjustments when necessary is a crucial part of keeping our family dreams in motion.

The NY 529 plan also allows for us to make investment choices that fit our comfort for risk.  Everyone is different and there are choices of investment options to accommodate different levels of risk taking.

What if the grandparents will handle college?

Fantastic! But it’s also smart to have a set plan in place. Many people can open a 529 account with as little as $1. This includes not only parents but other relatives and friends. The account owner selects the beneficiary, investments, and how the funds will be allocated. If you’re a New York State taxpayer, you can also benefit from the state tax deduction*. If one of the kiddos scores a full ride or doesn’t choose the higher education path, the beneficiary can be transferred to another sibling, cousin, grandkid, or even yourself. There are no time limits to use a 529 account.

painting rainbows with watercolors.

Any other benefits?

Including our kids in discussions about their 529 accounts has been a vital piece of teaching financial literacy. When the kids help with my freelance work, I pay them. I give them a token amount to spend and always make a contribution to their 529 accounts in front of them. Being lucky enough to have their Abuela gift contributions for birthdays and holidays further reinforces the importance of higher education and long-term savings goals. My mom’s gifts also simultaneously cut down on all of those meaningless presents that are soon forgotten about, collect clutter, and carry zero value over time. Having extended family on board is one of the best possible gifts. Especially in a world where you blink and your firstborn (who was just a tiny preschooler) is suddenly only four-and-a-half years away from college. 

Big reminder that I am NOT a financial advisor, so please read the disclaimer below:

* Contributions of up to $10,000 are deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. New York State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan, federal nonqualified withdrawals, or withdrawals used to pay elementary or secondary school tuition, registered apprenticeship program expenses, or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Please consult your tax advisor about your particular situation. Earnings on federal nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.  Tax and other benefits are contingent on meeting other requirements.  Please consult your tax advisor about your particular situation.

Investment returns are not guaranteed, and you could lose money by investing in the Direct Plan.

For more information about New York’s 529 College Savings Program Direct Plan, download a Disclosure Booklet and Tuition Savings Agreement or request one by calling 877-NYSAVES (877-697-2837). This document includes investment objectives, risks, charges, expenses, and other information. You should read and consider them carefully before investing.

Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other benefits that are only available for investments in that state’s 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

The Comptroller of the State of New York and the New York State Higher Education Services Corporation are the Program Administrators and are responsible for implementing and administering the Direct Plan.

Ascensus Broker Dealer Services, LLC, serves as Program Manager and, in connection with its affiliates, provides recordkeeping and administrative support services and is responsible for day-to-day operations of the Direct Plan. The Vanguard Group, Inc., serves as the Investment Manager. Vanguard Marketing Corporation provides marketing and distribution services to the Direct Plan.

No guarantee: None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, Inc., Ascensus Broker Dealer Services, LLC, nor any of their applicable affiliates insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio.

New York’s 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor-Guided Plan, which is sold exclusively through financial advisors and has different investment options and higher fees and expenses as well as financial advisor compensation.

©2020 New York’s 529 College Savings Program

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NY 529 Direct College Savings Plan: The Smart Way To Save For Your Child’s Education

Our children, our truest markers of ticking time, have a way of reminding us just how fleeting these precious moments of childhood are. It was just yesterday that I wrote this birthday letter for my son – but then I blinked and a few more years passed.   And all of the sudden, while making memories in what feels like a beautiful and chaotic mess, the days somehow slip into years.

I know this truth, as the mother of an eight and now six-year-old.

Yesterday:

New-York-529-College-Savings-Intrepid-NYC

And also, just yesterday:

how-to-save-for-kids-college-NY-529

How is that possible?

My kids have big dreams.  Our oldest has her sights set on being an inventor (who will create a teleportation device), a scientist, and an artist.  While the little guy dreams of being a chemist (the kind who mixes colorful potions) – and a LEGO builder too.  Like all parents, we want our kid’s ultimate career dreams to come to fruition – but in the midst of the financial responsibilities that come with adulthood it can be concerning to think about paying for our children’s college education when many colleges currently charge more than $60,000 per year.  What will the cost of college be in 10 to 15 years?

That’s why it’s crucial for parents like us to save for two college educations in the most efficient way possible – with a NY 529 Direct College Savings Plan for each child.  I jumped at the opportunity to meet with the plan’s financial team along with NY’s First Deputy Comptroller Pete Grannis, at an intimate event at the Intrepid Museum, hosted by Momtrends Media.

When choosing a 529 plan to use towards your child’s two-or-four year university, accredited vocational school, or postgraduate program along with supplies and accepted expenses (computers, room and board, etc.) – it’s important to find out if your state offers tax deductions for 529 contributions.  While states including New Jersey do not, New York 529 plans offer tax benefits.

  • 529 account funds can be used in any state – they are not limited to the state sponsoring the 529 plan.
  • Account contribution limits for 529 plans are generally high – from $200,000 to $300,000 or more, depending on the state.  The Direct Plan, accommodates contributions up to $370,000 on behalf of one beneficiary.  This amount includes all New York-sponsored 529 savings accounts held for the same beneficiary. Also, most institutions only count 6 percent of the total 529 funds as usable when determining financial aid eligibility.  In comparison, 20 percent of traditional savings account are factored into the financial aid eligibility process.
  • Many people can open a 529 account with as little as $25!  Including, not only parents but other relatives and friends – as long as U.S. citizenship or resident alien status is established.  The account owner selects the beneficiary, investments and how the funds will be used.  If you’re a New York State taxpayer, you can also benefit from the state tax deduction.
  • In lieu of toys that will be long forgotten, family and friends can contribute to kids 529 accounts creating a lasting gift that will grow over time.

To learn more about these powerful savings vehicles where earnings grow federally tax-deferred and where qualified withdrawals are tax-free – visit www.nysaves.org.  For Financial AID information visit www.hesc.ny.gov.

This is a sponsored post.  Opinions as always, are my own.

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