Maria Malloy, CFP®, details the ways in which we support clients when grieving the loss of their spouse.
15 Things to Know about College Savings Plans (with Special Oregon 529 Plan Tips)
The 529 Plan is the most popular college savings plan available. We have identified 15 things you should know in order to get the most out of a 529 Plan, with a focus on Oregon 529 Plans.
1. What Is a 529 Plan?
A 529 plan is state-sponsored investment program to help families save for college tax-free.
There are two types of 529 plans:
529 Education Savings Plans
These plans work like a 401(k) in that your savings can be invested in stock or bond mutual funds and any earnings grow tax-free. Educational expenses such as tuition, room and board, supplies, and even computers can be paid using these funds. 529 College Savings Plans are the most common type of plan, and the money can be used for schools in any state. Thinking about college overseas? 529 College Savings Plan can be used with some international schools as well.
529 Prepaid Tuition Plans
Fourteen states have 529 Prepaid Tuition Plans (Oregon does not). With a prepaid tuition plan, you can prepay all or part of an in-state public college education. The benefit is that you can lock in tuition at today’s rates, however, you must be sure that your child will be attending a public, in-state university for this to be a good option.
2. Why Use a 529 Plan over Other Plans?
There are three reasons to opt for a 529 plan for education savings:
Tax-free investment growth and withdrawals
There are no federal income tax benefits associated with a 529 plan contribution. However, your investment grows tax-deferred and qualified withdrawals are federally tax-free and state tax exempt as long as they are used for qualified education expenses.
State tax benefits
Thirty-four states offer tax deductions or credits on contributions to 529 plans, including Oregon. Click here to see the tax benefits associated with the Oregon 529 College Savings Plan.
Estate planning
The unique advantage to 529 plans is that the value is transferred out of your estate, yet you retain full control over the account as an owner. This can be an important estate planning tool for grandparents who are looking to reduce their estate taxes at death.
3. When Should I Open a 529 Plan?
We recommend you begin saving as early as possible as tax-free, compounding investment returns are powerful. Investing $100 a month from birth will give your child $43,000 for college, assuming a 7% rate of return. If you were to start saving when your child is 10, that number drops to less than $13,000.
4. What Kind of Investments Are Available?
529 plans are invested in a portfolio of mutual or index funds and they are managed by the state or an outside manager such as Fidelity, TD Ameritrade, Vanguard and many others.
5. Shop Around and Pay Attention to Fees
Depending on the investment manager, fees can vary according to the type of investment funds the manager uses. The fees may include advisor fees, program management fees, maintenance fees, and investment manager expense fees. Some states offer low-cost index funds and other states only offer actively managed mutual funds, so it pays to shop around, especially if your state does not offer a state tax deduction for contributions. State plans can be opened in most other states, and you can roll a 529 plan to a different state once every 12-month period, with some exceptions Additionally, some states and program managers may offer incentives in the form of a fee waiver if you opt to fund your account with direct deposit.
6. Two Primary 529 Investment Strategies
There are two types of 529 plan investment strategies: age-based or static funds.
Age-based, or target date funds
Age-based or target date plans automatically adjust your asset mix toward a more conservative allocation as your student approaches college age. This means that you start with a higher allocation to stocks when your child is younger and, by the time they reach college age, the assets are more heavily invested in cash and bonds. Using this type of automatic adjustment may be right for you if you do not have the time or knowledge to manually adjust the account’s asset mix. It’s important to note that these age-based shifts from aggressive to conservative may not happen fast enough if the market hits a period of volatility.
Static funds
The “static” option means that you hold an investment fund or portfolio of funds that maintain the same allocations over time.
7. Custodial Account
A 529 account is managed by a program manager: either the state or a third-party investment firm. The funds are held in a custodial account, meaning that your money is protected even if the state or third-party has financial issues.
8. The Investment Strategy Is Important
Diversification is an important risk management tool. Most 529 plans offer an investment strategy using U.S. stocks and bonds as well as international investments. Make sure you fully understand the specific investment options and their associated risks.
9. Private School Tuition Now Allowed
There have been several changes to college savings plans in recent years, including tax-free withdrawals for private, public and religious school tuition, up to $10,000 per year (formerly used to be $10,000 total). However, not all states recognize this benefit so some withdrawals could be taxed at the state level.
10. Understand the Basic Rules
- Both state and federal rules apply to 529 Plans.
- There can only be one owner and one beneficiary for a 529 account.
- You can own more than one 529 account.
- The student can be a beneficiary of more than one 529 account as long as the aggregate contributions don’t surpass the state’s account size limit. This limit varies by state and ranges from $235,000 to $575,000.
- Anyone can contribute to a 529 Plan account, not just a parent.
- The account owner may change the beneficiary, and some states permit the account owners to name a contingent beneficiary.
- Some states allow the account ownership to transfer to the beneficiary in the event the account owner dies.
- Plan holders may roll over $35,000 per beneficiary to a Roth IRA if the 529 plan is overfunded. Contributions in excess of $19,000 for single filers and $38,000 for couples filing jointly may be subject to gift taxes.
- Be sure to consult your tax advisor to make sure you have not exceeded the annual gift tax exclusion limits.
- For non-qualified withdrawals, earnings are subject to federal income tax and a 10% penalty.
11. Does the 529 Plan Affect My Financial Aid Options?
In general, 529s have a minimal impact on financial aid, but it depends on if the account is owned by the parent, grandparent or student. Broadly speaking, parent-owned 529 Plan accounts are treated favorably by the federal financial aid eligibility formula (maximum 5.64% rate) as well as financial aid income limits. A distribution from a 529 Plan to pay college expenses is not considered a “base-year income” that would reduce next year’s financial aid eligibility. It is important to remember that federal financial aid rules are subject to change, and you should confer with your accountant on the particulars of your situation.
12. Great Option for Grandparents
Grandparents can support a grandchild’s college education while benefiting from specific tax treatment. Any contributions up to $19,000 qualify for annual gift tax exclusion (and up to $95,000 in one year as long as no additional contribution is made over the next five years. The $95,000 maximum can become $190,000 for a married couple filing together, which is referred to as front-loading or superfunding the plan). Any contributions are removed from their estate, thus reducing any potential estate tax liability. Depending on the state, they may also be eligible for state income tax deductions.
In addition, if grandparents are the owners of a 529 account, the funds will not impact financial aid eligibility.
13. Time Limits on Withdrawals
529 Savings Plans do not have specific withdrawal or age requirements. Prepaid Tuition Plans, however, may have time limits for withdrawals.
14. Roll Overs
Every state allows for one rollover to another 529 plan per year without triggering tax penalties. However, you may have to repay state tax deductions or pay a fee if you go from an in-state plan to an out-of- state plan.
15. Prioritize Retirement
It is important that you don’t sacrifice your retirement savings for college savings. There are no scholarships and loans available for retirement and the biggest gift you can give your children is not relying on them for financial support in retirement.
Have questions about college savings plans? Have specific questions about 529 Plans specific to Oregon? Get in touch with us.
Sources: IRS, Kiplinger, Saving for College
Smart Money Moves for Moms at Every Stage
Motherhood changes everything—from your sleep schedule to your daily routine, and most importantly, your financial priorities. Whether you are preparing for your first child or managing the costs of children at college, money plays a significant role in how you plan, grow, and support your family. The good news? With the right financial decisions, moms can gain more control, reduce stress, and build a strong future for their families. Here is how to make smart money moves at every stage of motherhood.
1. New Moms: Building the Financial Foundation
- Budget for Baby – The arrival of a baby brings new expenses: diapers, daycare, medical bills, and more. Create a baby-specific budget that accounts for both one-time costs and ongoing monthly expenses.
- Start an Emergency Fund – Unexpected costs are part of parenting. Aim to build an emergency fund with 3–6 months’ worth of living expenses to protect your family in case of job loss or surprise medical bills.
- Review Insurance and Estate Plans – Now is the time to update your life insurance and name a guardian for your child. Make sure your will, health directives, and beneficiaries are all up to date.
2. Moms of Young Children: Maximizing your Income and Savings
- Evaluate Childcare Costs – Childcare can rival a mortgage in cost. Explore flexible work options if possible and open tax-advantaged accounts like Dependent Care FSAs. Some moms find it cost-effective to adjust work schedules to minimize full-time daycare, but every situation is unique to each family.
- Start Saving for College Early – College may seem far off, but starting early gives your money more time to grow. Consider opening a 529 college savings plan, which offers tax-free growth when used for qualified education expenses.
- Invest in Your Career – Whether you are returning to work or balancing a side hustle, keep your skills sharp. Continuing education, networking, and certifications can lead to better job opportunities and income.
3. Moms of Tweens and Teens – Modeling Behavior and Planning Ahead
- Teach Kids About Money – This is the perfect time to introduce your kids to smart financial habits. Give them a weekly allowance, open a savings account, and let them practice budgeting for small purchases.
- Revisit Long-Term Goals – With more clarity around your family’s lifestyle and future, review your retirement plan, homeownership goals, and college savings. Prioritize your retirement—after all, loans can help fund college, but not retirement.
- Control Lifestyle Creep – As your income increases, resist the temptation to overspend. Stick to your core values and invest in experiences, savings, and security, rather than material things.
4. Moms of Young Adults – Shifting Roles, Staying Secure
- Support Without Sacrificing – You may want to help with college, a first apartment, or even a wedding—but be cautious not to derail your own financial stability. It is okay to set boundaries while still offering support.
- Downsize or Reorganize – This might be a suitable time to reevaluate your home, car, or other big expenses. If your kids are becoming independent, you might consider downsizing or repurposing your budget for new goals like travel or business ventures.
- Update Your Financial Plan – Life changes fast. Make sure your estate plan, retirement contributions, and insurance policies reflect your current life stage and future goals.
Empowered Moms Make Confident Moves
Money does not have to be a source of stress—it can be a source of empowerment. Every mom, no matter her income or life stage, can take meaningful steps to create a more secure financial future for herself and her children. Start small, stay consistent, and seek the advice of a financial planner to help you plan for the bigger picture.
As mom and the family CFO, you are not just managing money — you are shaping your family’s future.
Contact us today to discuss these ideas and others with a financial planner.
Cleaning and Organizing … the Swedish Way
There are many organizational methods for reducing our clutter and making our spaces more efficient, tidy, and serene. There is the “One-Touch Method” which bucks procrastination in favor of putting things away immediately after use, and the “Neat Method” which employs various color-coded containers and labeling for sorting and display. The KonMari method from Japan instructs organizers to ask themselves if their items still spark joy in them, and if not, to release the belongings with gratitude. And, yet another approach has risen in popularity, this time from Sweden, known as “döstädning,” or the translated “death cleaning,” which seeks to reduce clutter and stress from an aging person’s home and life.
While it may sound severe, the idea of döstädning is actually a very thoughtful and respectful exercise for both the individual and their loved ones. Contrary to KonMari, which centers on the individual’s attachment to their possessions, this approach asks how family and survivors will feel about the items left behind after a loved one’s death. Margareta Magnussen, author of “The Gentle Art of Swedish Death Cleaning,” explains how employing döstädning can streamline an individual’s space and create a peaceful environment in which they can focus on what matters to them at that stage of life. The process of sorting and gifting belongings and communicating with family and friends about what they would like to have can often bring loved ones closer together, and may minimize the future burden on family members, allowing them to focus on grieving rather than a large clean-out project.
For those interested in the process of döstädning, professionals recommend the following:
- Tell your family about this process you are undertaking, what you hope to get out of the experience and ask them what items they would like to inherit from you.
- Start with your clothing and closets, sorting through what does and does not fit and what can be donated to charity.
- Declutter furniture, décor, and household items by room and then size, gifting functional pieces to family and friends and donating the rest.
- Address digital information and share details for important vendors such as your bank and insurance provider to your next of kin.
- Take stock of valuable jewelry and heirlooms and communicate with your insurance provider regarding appropriate coverage. Next, give some thought to who you will leave these items to and make those wishes apparent in your documents.
- Gather your paperwork and leave clear instructions regarding your will, advance health directive, power of attorney and any other related documents to your intended survivors.
While it may seem like a big undertaking, döstädning can give practitioners the chance to find memory and meaning in their possessions, as well as a sense of lightness and contentment when they let them go.
To connect with a client relationship manager, email info@vcmi.net.
New Year, Fresh Start
The start of the new year is a great time to review your finances and take any action that may be prudent. With that in mind, we have written a short manageable list of actionable items everyone can take to kick off their year on a productive and responsible note.
Revisit your budget
- Take the time to review your spending over the last year. Did your actual spending budget align with what you had planned? Evaluate your spending trends and make appropriate adjustments to your household balance sheet.
- Closely review your debt and strategize ways to pay it. Start by tackling the balances with the highest interest being charged and prioritize becoming debt free.
Prepare for the planned and unexpected
- Project the cost of expensive essentials – have you been noticing issues with your water heater? Or is there a household appliance that needs to be replaced? Preparing for a large expense will feel better than relying on a credit card when the time comes.
- Bolster emergency savings – no one wants to admit that they could be laid off or suffer some other setback that would put pressure on their savings. Look closely at what you have saved and what you can do to increase your savings in the short-term for a more secure future
Review your legal documents and insurance policies
- Have there been changes in your life that should be reflected in your legal documents, like a change in residential address or marital status? Pull your files out and review what is stated and contact your attorney if there are updates to make.
- Similarly, it may be worthwhile to assess your insurance coverage. If there have been changes to your home, such as an addition or remodel, it may be necessary to increase the amount of coverage. Other reasons for increasing insurance coverage could be a new car or boat purchase, family heirlooms and jewelry coming into your possession or outdoor investments such as a sprinkler system, hot tub or storage shed.
Increase your retirement contribution
- Another year passing means we are all that much closer to retirement. Whether that brings you excitement or anxiety, or a healthy mix of both, the realization hopefully moves you to increase the amount you are saving for your golden years.
If you have any questions about the above list, please email your client relationship manager or the team at info@vcmi.net.
