Commitment and a nurturing character help build strong families and businesses.
Before Flossie Hall co-founded and became the Chief Operating Officer of the Association of Military Spouse Entrepreneurs, she had one of the hardest jobs in the world: being a mother of four and an active duty Navy spouse. As a military wife, Hall has lived at 10 addresses over the last 14 years. For much of that time, she also had to be a solo parent.
“Plan something and the military laughs,” Hall quipped. She continued, “Business is the same way.”
After successfully navigating the financial challenges that come with new deployments, new homes and newborns (remember, she and her husband have four children), Hall has dedicated herself to the business of helping other military families.
AMSE is an entrepreneurship program built by military spouses, exclusively for military spouses. It is a digital organization that teaches military spouses around the world how to start their own businesses.
Military spouses are perfectly suited to be entrepreneurs because, according to Hall, “Entrepreneurs have to curve and swerve every single day.”
Like many entrepreneurs, Hall was the first person in her family to attain academic success. She was the first in her family to graduate from high school. And then, the first to attend and graduate from college.
Hall started at a community college and had to navigate financial aid on her own. She recalls signing paperwork as she learned about the cost of a college education. She accumulated a significant amount of debt to finance her education.
Today, Hall has a child in college whose education expenses weren’t budgeted for because she and her husband were very young parents. As a result, they learned the value of proper financial planning.
The Halls’ three younger children will also likely attend college. This time around, Hall and her husband are prepared. They opened college savings accounts that will help their kids pay for college.
Specifically, they started 529 accounts to help finance the children’s college educations. The special savings accounts have allowed the Halls to save long term for this specific financial planning objective. A 529 college savings plan is a great option to save for college because it is a tax-advantaged savings vehicle designed to fund specific education expenses.
The specific tax advantages are that earnings in a 529 plan account are allowed to grow over time free from federally income taxes. Then, when money is ultimately taken out of the account to pay qualified education expenses, there is no income tax on withdrawals.
Qualified education expenses include outlays such as tuition, books and potentially room and board. While a 529 plan account offers income tax breaks, contributions are not deductible.
There are many different 529 plans from which to choose. They are offered by each of the states and many educational institutions. And neither the account holder nor the beneficiary are required to reside in the state offering the plan. However, some plans may offer specific advantages to in-state residents.
Still, the fact that there are no residency restrictions means that there is ample opportunity to shop around in order to find the plan that best suits the needs of the beneficiary. Here are a few things to keep in mind when comparing plans:
- Every state offers at least one type of plan.
Plans fall into one of two categories: Prepaid Tuition Plans or College Savings Plans. Prepaid tuition plans lock in the current tuition rate that typically must be used at the specific institution. A college savings plan can be used at any school.
- Some plans allow others to contribute.
Most 529 plans allow people other than the account holder to make contributions to the beneficiary’s account. This is a great option for grandparents or other family members to contribute to a child’s future education. Instead of giving a child toys, friends and family can contribute to the student’s college fund.
- The account holder owns and controls the account.
Named beneficiaries of 529 plans have no legal right to funds in the accounts. This is the case whether they are minor children or adults over the age of majority. It is also a way to assure the money will be used for its intended purpose. The account holder may withdraw money. The beneficiary may not. But if withdrawals are not used for qualified educational expenses, earnings will incur taxes and penalties.
- Gift tax exclusion may apply.
529 plan contributions fall under annual and lifetime gift tax exclusions. The annual limit is currently $15,000 per beneficiary per contributor. This also means a married couple filing jointly can contribute up to $30,000 per child per account.
- Consider a UGift® account.
UGift provides a way to invite family and friends to contribute to a child’s 529 account. UGift is a secure, free-to-use online service that allows others to transfer funds directly into your child’s 529 plan account. Because there are no fees, the entirety of those gifts gets deposited.
Because there are many options, there isn’t one 529 plan that satisfies every family’s unique needs. To determine the right fit, it makes sense to compare investment options, fees and other factors specific to your situation.
The best way to save for college is to start early and to add funds consistently. A 529 college savings plan account is specifically designed for educational expenses and can be a great way to finance future education expenses. For more financial tools and tips visit VCM.com/military.