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Exclusive! Interview with 529 college savings plan expert Howard S. Gartenhaus. Expert College Savings Plan AdviceHoward S. Gartenhaus, CFS is the founder and President of Gartenhaus Financial Corp., a financial planning and investment advisory firm with over $40 million in assets under management. In practice since 1990, Mr. Gartenhaus assists clients by growing and protecting their wealth and by helping them achieve their financial goals. Specialties of the practice include retirement planning, college funding and low-stress investment strategies. Following is our exclusive 3-page interview conducted with Mr. Gartenhaus on April 1, 2004. You may contact Howard Gartenhaus directly: toll-free telephone 877-866-8800, or email hsg@gartenhaus.com. What exactly is a 529 plan? A 529 plan is a savings plan operated by the individual states (or in some cases an educational institution) that allows families to invest for future college expenses. They provide special tax benefits as long as the funds are used for higher educational expenses. There are two types of 529 plans -- prepaid and savings. All states now have at least one type of 529 plan. Are there any tax breaks for investing in a 529 plan? Yes! Your investment grows tax-deferred and withdrawals to pay for the beneficiary’s college expenses come out federally tax-free. (Note: unless Congress decides to extend this tax break, distributions made after 2010 would be subject to income tax at the child’s tax rate. One never knows what Congress will do, but many observers believe that the 2010 “sunset” provision will be permanently lifted). Your own state may offer some state tax deductions as well. What’s the difference between a prepaid tuition plan and a savings plan? A prepaid tuition plan allows you to purchase in-state college tuition at today’s prices. Your money grows at whatever the college tuition inflation rate is in your state of residence. When your child reaches college age you have essentially prepaid the tuition bill. The prepaid plan only covers the cost of tuition -- not other college related expenses such as room and board, books, etc. A savings plan allows you to invest in a variety of investment portfolios -- principally through mutual funds. There is a wide array of choices from more aggressive to conservative and there are portfolios that are also allocated according to your child’s age. While your child is younger these “age-based” portfolios are more growth oriented. As your child gets closer to entering college they automatically become more conservative. Unlike the prepaid tuition plan, proceeds from a savings plan may be used for any college-related expenses. |
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