The Most Reliable Predictor of Future Wealth

Sandra Cleveland |

A college education has significant, annual recurring rewards for graduates. According to the Bureau of Labor Statistics, individuals with 4-year college degrees earn, on average, almost $25,000 more per year than those who never attended college, while those with professional degrees earn over $60,000 more per year than those who never attended college.
Even with these average yet significant salary differences of a college education, the decision to attend college and earn a degree is often questioned due to the steep price of a college education and the high amount of education related debt after graduation.
A college education for a family member should be an expected goal, like retirement. It is not an emergency that only happens to some individuals.
There is an important tool to help families save and pay for college that is just like funding tax favored accounts to plan for retirement. A 529 plan is a tax-efficient way to save and pay for college expenses. At a federal level it is most similar to a Roth IRA, you make periodic after-tax contributions. The distributions from both plans are tax and penalty free under IRS restrictions. When the 529 distributions are used for the beneficiary’s qualifying education costs there is no tax or penalties on the withdrawals.
A 529 plan has a number of unique features:
• No annual contribution limits, but a total maximum balance limit, after which no additional contributions can be made
• No limit on how large the 529 account can grow
• Beneficiaries can be changed without tax consequences
• Owners can be changed generally without tax consequences
• Partial account transfers can be made to a new beneficiary to cover qualified expenses or multiple family members
A college degree is one of the most reliable predictors of future income and wealth. We need all the help available to equip our future generation with the higher education that predicts their personal success and an improved society.
Parents, grandparents, and other relatives can join together to assist in funding this benefit for the next generation through the use of 529 plans.