A 529 Plan For Your Retirement Years?

Here is a good story about a unique use of 529 college savings programs. Bottom line, if you are interested in studying at home or abroad when you graduate from your first career, you can use a 529 plan to pay for it!

• May be eligible for state tax deduction
• Investments grow without taxes and when spent for accredited higher education withdrawn without taxes also
• You can name a contingent beneficiary

Check it out here.
Courses here.

Digg This!

Pension Protection Act

The Pension Protection Act of 2006 was recently signed into law by President Bush. The act contains numerous provisions that benefit individuals including:

• Made permanent the increased IRA contribution limits that were set to expire in 2010 and provides for indexing contributions to inflation after 2008.
• Made permanent the tax free withdrawal status for qualified distributions from 529 college savings plans that were scheduled to expire in 2010.
• Allows non-spouse beneficiaries of qualifies plan assets to rollover the proceeds to their own IRA.
• Allows for automatic enrollment in 401k plans, requiring workers to opt out rather than opt in.
• Allows employers to pay advisors to counsel participants in qualified plans without becoming liable for the advise given to participants as long as the company performs due diligence when hiring advisors and the advisor is a fiduciary accepting person liability for the advise provided.
• Allows members of the military called to active duty to take penalty free distributions from IRA, 401k, and similar qualified plans.
• Permanently allow for Roth 401k and 403b plans.
• Made permanent the Savers Credit under which low and moderate income tax payers can receive a non refundable credit for contributions to retirement savings plans and IRAs based on income and filing status.

For more information look here and here.

technorati tags:finance, Pension Protection Act of 2006, financial planning,

The South Carolina 529 College Savings Plan

The state of South Carolina's 529 College Savings Plan- FutureScholar - is managed by Columbia Management a division of BankAmerica. For South Carolina residents it offers one very clear advantage to any other 529 plan a South Carolina Resident may be considering - a deduction from your South Carolina state income taxes. Note- Not a deduction on your federal return.

Contributions to the FutureScholar program work much like a traditional IRA deduction on your South Carolina income taxes, contributions reduce your taxable income. With the realatively flat income tax rates in South Carolina this means most residents will save 7% for any contribution made to their FutureScholar accounts. For example, if you are a South Carolina resident and contribut $10,000 to a FutureScholar account for your child or grand child you will recognize savings of $700 when you file your state income tax return (this will, unfortunately, also reduce your deduction for state income taxes paid on your federal return if you itemize deductions).

Like all 529 college savings accounts the investments in your account will grow tax deferred and currently can be withdrawn tax free to pay qualified education expenses. While there is a sunset provision for tax free withdrawals in 2010, 529 plans have become so popular that Congress may well extend this tax break, and even if they do not, the portion of the withdrawals representing investment gain would be taxed at the students income tax rate.

529 plans also have some features that make them useful in developing an estate plan. You and a spouse can both contribute, allowing contributions of up to $12,000 each without triggering a gift tax return and you can make up to a five year contribution in one year or up to $120,000 for a married couple if they make no other gifts to the student during that period of time, and if you die before the five year period has passed a prorated portion of the gift will be includable in your estate. Many worry about moving large sums of cash from their personnal assets, however the contributor retains control of the assets and can even reclaim (withdraw) the assets themselves subject to taxes and a 10% penalty on the earnings portion of the withdrawal.

South Carolina residents can also establish a 529 plan directly, without a financial intermediary, and invest in the mutual funds offered in the plan with no sales charge (commision). The forms needed are available on the website, FutureScholar.com.

With college costs rising at about twice the reported CPI, an early start is essential. If you are a South Carolina resident you should consider this college savings option. For more information visit FutureScholar.com.

Technorati Tag SC 529 College Savings Plan