To market and promote 529 college savings plans, the college savings industry chose May 29 (529) as College Savings Day. It could catch on. Seizing the day worked for Star Wars fans, who affectionately claim May 4th as their day and potheads, they can’t remember why, staked April 20, 420, as theirs. To me, it makes a lot more sense to spend less on toys and put the difference in future tuition instead. The United States has a $28 billion toy industry; most of them are broken or forgotten before the next birthday.

Section 529 of the Internal Revenue Code allows tax-free distributions for qualified higher education expenses. The Jobs and Tax Cuts Act of 2017 expanded tax-free withdrawals to include primary and secondary tuition as well. Discuss with an accountant or financial professional but generally speaking qualified expenses include tuition, books, room and board, and approved electronic devices. The amount spent on room and board must be no higher than the amount determined by the institution as the allowance for room and board, or the actual amount charged for room and board by the institution for institution-owned housing. 529 plans can be prepaid tuition plans at specific state universities or colleges or investment plans that can be used at any qualified higher education institution.

College funding should come in third, like Florida in the SEC East, behind emergency savings and retirement contributions and a 529 plan is often the best option. Uniform Transfer to Minor Accounts (UTMA) become the child’s at age 18 in most states, but 529 plans remain in control of the owner, not the beneficiary. If a beneficiary decides not to continue their education, switch beneficiaries. Also distributions from 529 plans offer young adults money management and personal finance skills. While tuition payments can be sent directly to the college, expenses for room and board or other supplies are often reimbursed. The student has to keep receipts for verification.

Each state offers a 529 plan; over the last decade, plans sold directly to consumers have soared past their advisor-sold counterparts. Costs are the main reason; advisor-sold plans have an average expenses of .93 percent compared to .39 percent for plans purchased directly. Most 529 plans have age-based options that become less aggressive as the beneficiary gets closer to attending school. Instead of making changes in five-year increments like a target-date fund for retirees, some now offer investment changes in two-year intervals. Given the narrow time frame for college expenses, this innovative wrinkle could prove advantageous.

529 plans don’t have burdensome requirements for initial deposits. Modest contributions, like $50 per month can grow to almost $17,000 in 18 years assuming a 5 percent return. Residents of states with no state income tax can’t use tax credits or deductions, but they can choose a plan offered by any state.

You can’t always get what you want but Buz Livingston, CFP can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.