What Grandparents Need to Know about 529 Plans

Retirement, Income, Tax & Estate Planning.

What Grandparents Need to Know about 529 Plans

September 4, 2014 Investing Newsletter Retirement Planning Saving for the Grandchidren Uncategorized 0

Many of my clients tell me about the level of anxiety they are feeling today, but not about their own situation but rather the future for their kids and grandkids.  Many fear the next few generations won’t do as well as they did and this keeps many a grandmother awake at night.

I often get asked about whether a 529 college savings plan makes sense for their grandchildren.  Should they set up this plan for each grandchild and how much should they contribute each year.  Many also have questions about how taxes play into all this.

Here’s what you need to know: opening up a 529 plan for grandkids in your name might hurt these kids’ chances of getting financial aid for college.  What do you need to do?  Get your son or daughter, or (if no children) your nieces or nephews to open these accounts in their names, not yours, and you just contribute to their plans.

As you know, when Congress or the IRS is involved, nothing is either easy nor does it usually make any sense.  So…if you already have started a 529 plan for your grandkids, find out whether you can just transfer these funds to the 529 plans your kids set up for their kids.

Now the big question, is a 529 plan the right way to go or are their alternative ways of helping your grandkids while also reducing your anxiety?  What about a small life insurance policy for your grandchild where you fund it each year with $500 or $600?  This is a tremendous way of helping those kids plan for retirement, besides leaving a nice death benefit where beneficiaries can change as the grandkids mature. 

Using TAX-FREE loans from this life insurance policy will provide your grandkids with a super pension when they get to retirement age.  Since the funding per year is low, should you die, your grandkids should be able to continue paying the low premium each year.

Anxiety level going down yet or do you need more information?  If so, just e-mail me or call the office and get on my calendar.

Peter Signature

Your Retirement Quarterback®

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