Résumé
Copyright 2004 San Antonio Express-News
San Antonio Express-News (Texas)
November 13, 2004, Saturday , METRO
SECTION: BUSINESS EXPRESS; Pg. 7H
LENGTH: 1114 words
HEADLINE: PERSONAL FINANCE ; Planning ahead ; Experts say the 529 college plans are powerful savings plans.
BYLINE: Analisa Nazareno
BODY: Two years ago, Nancy Thomas set up a section 529 college saving plan for her two children.
"A lot of times, people want to know how much college can cost," said Thomas, a vice president at Frost Investment Services. "I think they know it's going to be expensive, but when they put a dollar sign to it, it's like 'Oh my gosh.'"
Her 7-year-old son, Paul, is thinking about going to Trinity University - where his father, Chip Thomas, is the defensive coordinator for the football team. Her 5-year-old daughter, Joann, is thinking about becoming an art teacher and perhaps going to her mother's alma mater, Ohio State University.
Private school and out-of-state tuition, plus books, fees and extracurricular activities might cost the family hundreds of thousands of dollars in higher education costs down the road.
Thomas's company started offering 529 plans soon after Congress passed sweeping tax laws in 2001 that made it beneficial for families to save money in the tax-free state college savings plans.
Through 529 plans, parents, grandparents, aunts or uncles are able to sock up to $250,000 a year with no federal taxes on earnings. They can name their children, grandchildren, nieces, nephews, spouse or themselves as beneficiaries. And they are able to withdraw money for educational purposes free of federal taxes.
Since 2001, assets in 529 plans have quadrupled in size to $54.3 billion, and the number of accounts has nearly tripled in number to 6.8 million, according to the College Savings Plans Network.
Because of the plans' tremendous growth and the involvement of brokers in more than 80 percent of sales of such accounts, the Securities and Exchange Commission and the National Association of Securities Dealers are investigating the 529 plan industry.
And Congress is discussing whether states - which once used 529 plans for their prepaid college tuition programs - should have any involvement in such plans. They are also discussing how the federal government could have better oversight of the investment plans.
"Congress should act to make sure that investors - and not state bureaucrats, brokers or fund managers - capture the tax benefits from section 529 plans," Sen. Peter G. Fitzgerald, R-Ill., chairman of the Senate Financial Management, Budget and International Security subcommittee, told members of the subcommittee. "Right now too many middlemen, including state bureaucrats, are feeding at the trough."
NASD Chairman Robert Glauber told members of the Securities Industry Association at their annual meeting earlier this month that 529 plans ought to be monitored in the same way that mutual funds are. There are about 80 different 529 plans with different fee structures, he said. And they ought to uniformly report what those fee structures are.
"We think all mutual fund disclosure practices like this, whatever the final form, should apply to all mutual funds and 529 plans," Glauber said.
At the same time, these federal regulatory agencies and Congress aren't saying that the plans should be scrapped altogether.
The 529 savings plans are powerful savings tools, the NASD is telling parents in brochures. With due diligence, investors can find a plan with lower fees, save thousands of dollars on taxes, and use time and compounding interest to build on their contributions to the funds.
Family members seeking to set up educational savings accounts should be aware that there are broker fees, state fees and setup fees. Broker fees, for example, are avoidable by setting up a plan direct with an administrator. Investors should also investigate possible deductions in state taxes.
And they need to consider which investment strategies - growth, income or stability - are best suited for their family's needs.
"There are some plans that if you transfer from one state plan to another state plan, they will have a state income tax recapture penalty on that plan," said Paul Riskus, a certified financial planner with USAA. "So you have to pay income taxes. There are only a couple of plans out there like that, but people should be aware that this is an issue."
The San Antonio Express-News owns the copyright to this story. For a full copy of this story, e-mail Analisa and she will send you a clip via e-mail or snail mail.
San Antonio Express-News (Texas)
November 13, 2004, Saturday , METRO
SECTION: BUSINESS EXPRESS; Pg. 7H
LENGTH: 1114 words
HEADLINE: PERSONAL FINANCE ; Planning ahead ; Experts say the 529 college plans are powerful savings plans.
BYLINE: Analisa Nazareno
BODY: Two years ago, Nancy Thomas set up a section 529 college saving plan for her two children.
"A lot of times, people want to know how much college can cost," said Thomas, a vice president at Frost Investment Services. "I think they know it's going to be expensive, but when they put a dollar sign to it, it's like 'Oh my gosh.'"
Her 7-year-old son, Paul, is thinking about going to Trinity University - where his father, Chip Thomas, is the defensive coordinator for the football team. Her 5-year-old daughter, Joann, is thinking about becoming an art teacher and perhaps going to her mother's alma mater, Ohio State University.
Private school and out-of-state tuition, plus books, fees and extracurricular activities might cost the family hundreds of thousands of dollars in higher education costs down the road.
Thomas's company started offering 529 plans soon after Congress passed sweeping tax laws in 2001 that made it beneficial for families to save money in the tax-free state college savings plans.
Through 529 plans, parents, grandparents, aunts or uncles are able to sock up to $250,000 a year with no federal taxes on earnings. They can name their children, grandchildren, nieces, nephews, spouse or themselves as beneficiaries. And they are able to withdraw money for educational purposes free of federal taxes.
Since 2001, assets in 529 plans have quadrupled in size to $54.3 billion, and the number of accounts has nearly tripled in number to 6.8 million, according to the College Savings Plans Network.
Because of the plans' tremendous growth and the involvement of brokers in more than 80 percent of sales of such accounts, the Securities and Exchange Commission and the National Association of Securities Dealers are investigating the 529 plan industry.
And Congress is discussing whether states - which once used 529 plans for their prepaid college tuition programs - should have any involvement in such plans. They are also discussing how the federal government could have better oversight of the investment plans.
"Congress should act to make sure that investors - and not state bureaucrats, brokers or fund managers - capture the tax benefits from section 529 plans," Sen. Peter G. Fitzgerald, R-Ill., chairman of the Senate Financial Management, Budget and International Security subcommittee, told members of the subcommittee. "Right now too many middlemen, including state bureaucrats, are feeding at the trough."
NASD Chairman Robert Glauber told members of the Securities Industry Association at their annual meeting earlier this month that 529 plans ought to be monitored in the same way that mutual funds are. There are about 80 different 529 plans with different fee structures, he said. And they ought to uniformly report what those fee structures are.
"We think all mutual fund disclosure practices like this, whatever the final form, should apply to all mutual funds and 529 plans," Glauber said.
At the same time, these federal regulatory agencies and Congress aren't saying that the plans should be scrapped altogether.
The 529 savings plans are powerful savings tools, the NASD is telling parents in brochures. With due diligence, investors can find a plan with lower fees, save thousands of dollars on taxes, and use time and compounding interest to build on their contributions to the funds.
Family members seeking to set up educational savings accounts should be aware that there are broker fees, state fees and setup fees. Broker fees, for example, are avoidable by setting up a plan direct with an administrator. Investors should also investigate possible deductions in state taxes.
And they need to consider which investment strategies - growth, income or stability - are best suited for their family's needs.
"There are some plans that if you transfer from one state plan to another state plan, they will have a state income tax recapture penalty on that plan," said Paul Riskus, a certified financial planner with USAA. "So you have to pay income taxes. There are only a couple of plans out there like that, but people should be aware that this is an issue."
The San Antonio Express-News owns the copyright to this story. For a full copy of this story, e-mail Analisa and she will send you a clip via e-mail or snail mail.
