For a Better World, Empower the Next Generation
It’s never too early to start saving for college.
May 29th is National College Savings Day (529 Day), more on that below! But Memorial Weekend is also upon us. There are many ways to honor our brave men and women who died serving this country. Hamilton Wealth made a donation today to TAPS, an organization dedicated to helping families who are grieving the death of a military loved one. Remember to pause for a one-minute moment of silence on Memorial Day at 3pm to honor those who lost their lives in service.
source: Dogwood (Law & Policy)
In 1996, congress passed legislation that lead to the creation of Section 529 of the Internal Revenue Code. We believe 529 Education Savings plans are the best tax advantaged vehicles to save for education. Don’t have kids? You can contribute to plans for grandkids, nieces, nephews, cousins, and even friends. Consider empowering the next generation with a contribution to a 529 plan.
A quality education is essential to succeed in today’s highly competitive workplace, and possibly the best weapon against technological automation and artificial intelligence. However, unlike past generations, today, a quality education is very expensive. We have a massive student loan crisis in our country, preventing graduates from pursuing their dreams of creating a business, starting a family, or purchasing a home.
The student loan numbers are unimaginable when considering the following, (per US Federal Reserve & Federal Reserve Bank of NY):
44 million borrowers
$1.71 TRILLION in student loan debt ($739B more than all US credit card debt combined)
$38K is average balance
$300 per month average payment
11% are delinquent 90 days or in default
There is talk of wiping out student loan debt, to relieve the burden on young adults to allow them to save and invest in other meaningful pursuits. Whether they save it or spend it, this would benefit our economy. There is speculation that a public education may be free in the future, but I’m less optimistic than most on this. This likely drives up demand and cost for the most sought after schools, many of which are private.
529 plans offer the following benefits:
$15K annual contributions per person ($30K married couples filing jointly), per gifting limits
No limit to how many people may contribute to the 529…grandparents, aunts, uncles, cousins, friends, are free to contribute to the same plan
May front load $75K or 5 years of contributions (helps reduce estate for tax planning)
The account owner (ie: parents, grandparents) maintain control of assets, always
You may transfer to another ‘family member’ of the original beneficiary, in the case they get scholarship or don’t attend college
Investments grow tax deferred
Tax free withdrawals for education qualified expenses (tuition, room and board, books, computers, meals)
May use $10K annually to cover the cost of K-12 elementary or secondary public, private or parochial schools
Average college tuition today, including room and board:
$22,000 per year (Public, in-state), or approx. $90K for 4 years
$27,300 per year (Public, out of state), or approx. $110K
$49,300 per year (Private) or approx. $200K
Source: Average College Tuition - Business Insider
Projected cost of college in 18 years, based on a 5% inflation rate and national averages (see image below).
$278K for public college
$569K for private college
You would need to save the following in a 529 for the plan for a child born today to fully cover college costs, growing investments at 6.5% (see image below).
$553 per month for public college
$1,132 per month for private college
At Hamilton Wealth, our kids have 529 College Savings Plans. We are happy to run personalized projections and set up a 529 for your family at any time. Keep in mind, for existing clients, we do not bill on these assets or charge for establishing a 529 plan.
On behalf of everyone at HW, have a wonderful Memorial Weekend.
Thank you,
Jerry
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Hamilton Wealth, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Hamilton Wealth, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Hamilton Wealth, LLC unless a client service agreement is in place.