By: Hon. Michael L. Fitzgerald
State Treasurer, State of Iowa
September 5, 2014

Treasurer FitzgeraldAs a grandparent there are few things that give me as much joy as watching my grandson, Michael, learn and discover new things. Whether we are visiting a petting zoo, reading a book or simply playing with items around the house, the amazement in his eyes at each new discovery is truly fascinating. As he continues to grow, I hope that he continues to be intrigued and amazed by each new thing he learns. As a grandparent, I want to help prepare him for any future higher-education costs he may encounter on his journey of discovery. That is why I make contributions to my College Savings Iowa 529 plan for Michael.

What better way to celebrate Grandparents’ Day this weekend than by helping to ensure our grandchildren have a future with less debt?  With the cost of a four-year degree projected to be $247,377* when it is time for Michael to attend; I know the earlier we start saving, the easier it will be. I want to encourage all grandparents to join me by starting or making a contribution to a 529 account for your grandchildren.

By investing in a state sponsored 529 plan you are able to take advantage of many benefits that are unique to 529s:


    • Save on your taxes. Contributions and earnings grow tax-exempt at the federal level and withdrawals are tax-free when used to pay for qualified higher education expenses.** Additionally, 34 states and the District of Columbia offer state tax deductions or credits for contributing to certain 529 plans.


    • Flexibility. Most 529s can be used at any institution of higher education in the United States or abroad that qualifies under federal guidelines. The account assets can also be transferred to another family member if the child decides not to pursue higher education.


    • Convenience. Contributions to 529 plans can be made through payroll deduction or automatic transfers from a bank account. Account owners can also opt to make a lump sum contribution of up to $70,000 per beneficiary or $140,000 if married filing jointly and avoid incurring a Gift Tax on this amount by electing to use five years of the annual gift tax exclusion all in one year.

As you get together to celebrate Grandparents’ Day this weekend, be sure to consider saving for the grandchildren in your life. In as little as 10 minutes you could be well on the way to making their dreams a possibility!

*Assumed inflation rate of 6%.
** Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

About the Author: Iowa State Treasurer Michael L. Fitzgerald is the Past Chair of the College Savings Plans Network and the administrator of Iowa’s 529 College Savings Programs including College Savings Iowa, with more than $4.1 billion invested.