5 Things to Know About a 529 Plan

Whether a child is 8 or 18 years old, you and your clients should financially prepare for his or her college education. Many clients have questions and concerns about 529 plans, especially if college may not be an immediate priority. Here are some common questions and answers to help guide the conversation toward savings success.

  1. We are expecting a baby. Is it too early to start a 529? No way! With college costs continually rising, you will need as many resources as possible to pay for your child’s higher education. The power of compounding means that the earlier you open the 529 account, the more your family could potentially benefit. Put whatever you can into the plan, and then go paint the nursery.
  1. I’m not sure if my child will go to college. What will happen if he or she doesn’t use the money in the plan? There are several ways to use the funds in a 529 plan without funding an education for the original beneficiary.
  1. The funds can be transferred to anyone related to the original beneficiary.
  2. The funds can be removed for purposes other than education, but will be subject to a 10% penalty as well as income tax on the earnings.

You can also refer to this article1 for more information.

  1. Can we use the funds for expenses other than tuition and fees? You can pay for several expenses beyond tuition and fees with funds from a 529, as you will find listed here2. If your student receives a scholarship, the amount of the scholarship can be removed from the 529 and used for non-qualifying expenses without incurring the 10% penalty (earnings would still be subject to income tax).
  1. Do I need to be able to fully fund the 529? No! Put in as much as you can. Again, the power of compounding can potentially affect the balance, so start as soon as you can.
  1. Is this the only way to pay for college? Absolutely not. A 529 is a great way to get started saving for college, and to benefit from growth over time. However, thousands of scholarships, grants, and interest-free loans may become available when your child begins applying to colleges.

The Internal Revenue Service provides guidance on 529 Plans in their Q&A3. We recommend seeking the counsel of a tax advisor as tax laws change over time and may differ by residency and other factors.

Note: The information contained in this blog does not constitute tax advice and is provided for informational purposes only. Clients and financial advisors should consult their tax advisor, local taxing authority, and/or plan provider or sponsor for more information.


1 https://www.usnews.com/education/best-colleges/paying-for-college/articles/2014/07/09/beware-of-5-myths-about-changing-a-529-plan-beneficiary

2 https://www.forbes.com/sites/brianboswell/2016/10/02/what-can-you-spend-your-529-savings-on/#17aa0724c3cd  

3 https://www.irs.gov/uac/529-plans-questions-and-answers


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5 Ways to Connect with Your Clients’ College Students

In our last blog post, we discussed the importance of connecting with your clients’ college students. However, we recognize that financial planning is not always a #trendingtopic, and it’s difficult to get students on board, or even in the room. Here are some ideas about how to engage your youngest clients.

  1. Hold a seminar. Do you operate in a small town or community? Have several clients whose kids attend the same high school? Offer a high school an hour of your time, and provide a simple seminar on college finance basics. You may get the opportunity to promote your services to both parents and students through the school.
  1. Have an individual meeting. Although Mom and Dad will need to be on board with any final budgets, it is important that the student understands that you are there to understand his or her personal priorities and concerns. A casual, initial conversation to open up a dialogue is critical. Try to have this meeting as soon as possible, preferably while they are still applying to colleges. Keep in mind, the process often begins before senior year1.
  1. Send a congratulatory letter. Acceptance to college is a significant achievement. Send a personalized letter to your client’s family congratulating them on their child’s success and offering to discuss the finances involved with both selecting a college and creating an annual budget.
  1. Follow up, with both parents and students. Students’ goals and financial aid packages change every year. This means that both parents and students have to reevaluate their budgets and understand the possibilities. By reaching out annually, you will provide critical support throughout the student’s college career.
  1. Use social media. College students connect best through online social platforms. Although you must make sure that your platforms and content are compliant, this can be a great way to share useful information with your younger clients. While you’re at it, you can follow us on Twitter @SigmaFinancial or @ParklandSecLLC.

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1 “College Planning Timelines;” August 22, 2016; Peterson’s Staff; Peterson’s; Article Link 1

Memorial Day 2017 – Reflections and Thoughts

The President of Sigma Financial Corporation, Parkland Securities, LLC, and Sigma Planning Corporation – Jerry Rydell – has been a lifelong proud and ardent supporter of the United States military. Nothing touches Jerry more than the sacrifices our nation’s military men and women, and their families, make in the defense of our country.

As Jerry says, “We know all too well that freedom is not free. Our military keeps us safe and allows us to live our lives in the pursuit of our dreams. Our protectors, and their families, earn and deserve our respect and support. Many who return home do so injured, whether body, mind, or both. Others do not return at all.”

He continues, “Especially on Memorial Day, we honor those who have fallen in our defense. We pay tribute to them and their sacrifices. Moreover, we extend our heart-felt condolences to the families and friends of the fallen. Thank you for your courage, your strength, and your sacrifice.”

Who better to illustrate the impact of such sacrifice than an Army widow? A few years ago, Wesley Bauguess shared her thoughts on losing her husband and the father of their children. We have no direct affiliation with this courageous writer…but we do share an affinity for her words, and we are touched by her strength.

We encourage you to read her reflections, and think about all those like her: parents, siblings, children, and friends who have lost their loved ones in the defense of our country.

“Memorial Day: Reflections of an Army widow,” by Wesley Bauguess, as appeared in Fox News, May 19, 2017: http://www.foxnews.com/opinion/2017/05/19/memorial-day-reflections-army-widow.html

Our hometown Memorial Day often consists of parades, picnics, barbecues, and long weekend outings. We encourage all Americans to stop in the midst of those activities to pause and reflect.

Jerry and the people of the company are proud to honor and contribute to veterans and military families, including support for charities like The Semper Fi Fund and the Gary Sinise Foundation. We will continue that tradition this year as well.

On this Memorial Day, thank you to all Americans most deeply affected by tragedy – tragedy that they have experienced on our behalf. Indeed, freedom is not free.


5 Reasons to Connect with Your Clients’ College Students

Your clients are thrilled because this fall those 529 Plans are finally going to good use! The summer before entering college is an exciting, hectic, and nerve-wracking time for both parents and students. As a financial advisor for the entire family, you can play an integral role in this process, and create a vital foundation of money mindfulness.

  1. College life has unique, confusing budgeting circumstances. She’s not living at home, but Mom and Dad still pay the rent and grocery bills. His part-time job covers pizza and nights out, but what about new clothes? You can help families determine a fair and feasible budgeting strategy…and help them avoid a few awkward phone calls.
  1. College students are completely clueless about finances. LendEdu and others have surveyed college students’ knowledge of credit, savings, loans, and investment. For all their education, what do these bright young adults know about money management? Not much. In fact, 59% gave themselves a C- or worse when grading themselves on financial literacy1. In the school of life, this is a class that they will need to pass.
  1. Decisions about loans in college can haunt students forever. As you already know, America is in a student debt crisis. Americans owe more than $1.4 trillion in student loans2, which has probably increased since typing that sentence. This debt cripples our economy, and Americans’ quality of life. Fortunately, you can help college students secure their financial future by helping them make smart loan decisions now.
  1. Credit card companies target vulnerable college students. When you’re 18, $5,000 in credit sounds like free money. Credit card companies take advantage of these students by advertising on college campuses, and offering unbelievable benefits for students who sign up immediately. Students are pressured to sign up quickly, and are often tempted to use the credit when they are low on cash.
  1. They can become your clients. In the beginning, you might only be Mom and Dad’s money manager. However, as students realize the incredible benefit of financial planning, you can become their first stop for all of their finances. Given that $40 trillion will be inherited by 20503, it is critical to build relationships that will help you serve America’s next generation of investors.

1 “2016 College Students And Personal Finance Study;” Dave Rathmanner; May 26, 2016; LendEdu: Article Link 1

2 “A Look at the Shocking Student Loan Debt Statistics for 2017,” Updated May 8, 2017, Student Loan Hero: Article Link 2

3 “How Advisors Can Stop Losing Clients’ Heirs as Clients;” March 1, 2016; Jane Wollman Rusoff; ThinkAdvisor: Article Link

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