By: Hon. Michael L. Fitzgerald
State Treasurer, State of Iowa
March 30, 2015
When it comes to our children, we all want the best for them and their futures. Watching them grow and develop, we observe them exploring with their imaginations and discovering the endless possibilities for success in life. Graduating with a college degree is a huge achievement, and one way to help set them up for that success is to save for their higher education. However, much like the April 15 deadline for taxes, the time to start saving for your children’s college education is over before you know it, which is why I encourage you to take your 2014 refund and invest it in your children’s future.
By investing your refund in a state-sponsored 529 plan you have:
1. Tax savings. 529 plans were designed to provide families and friends a tax-advantaged way to save for higher education expenses. Thirty-four states and the District of Columbia offer state tax deductions or credits for contributions to certain 529 plans, which could help your tax refund grow to an even larger amount for the next tax year. In addition to the potential state tax benefits, participants are also able to withdraw their investment federally tax-free to pay for qualified expenses (and many states allow this as well).
2. Flexibility. You have the ability to save for anyone: children, grandchildren, friends or even yourself. 529 plans may also be used to pay for a variety of expenses, including tuition, books, supplies and certain room and board costs, at any eligible college, university, community college, vocational/technical schools and graduate schools.
3. Low minimum investments. Most plans have very low minimum monthly contribution limits that make them attractive to families from many income levels. Some states will have minimum limits as low as $15.
Although there are many ways to prepare a child for a successful future, none can bring greater lifetime rewards than a quality education. As I always say when discussing college savings with families, by starting early, saving a little at a time and making smart investment choices, you can make your 529 plan work for you and get the most out of these precious years. They grow up fast; you will be glad you planned for their tomorrow today!
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 $4.2 billion invested.