Are you a worker or an aspiring investor looking for ways to build your retirement funds? The renowned financial adviser Ray Loewe recommends you try getting a 529 college savings plan. Contrary to popular belief, the 529 plan isn’t only meant to build finances to fund your children’s college education, but it can also be used to build your retirement funds! Loewe reveals how it works!
Loewe revealed how he first discovered this method from his past experience of watching his clients. As a financial adviser, he noticed how his clients struggled in transitioning to retirement life. While most of his clients were happy and content that they had built retirement funds that allowed them to live a leisurely life, somehow they noticed how their lives were at a standstill. According to them, having too much leisure time became boring, and they didn’t know what to do with it anymore.
According to retirees, having too much leisure time became boring, and they didn’t know what to do with it anymore.
Loewethen thought at that time that he and his wife would never have a boring time the moment they retire. According to him, they planned to travel the world and take college classes. To realize his plan, Loewe got a 529 plan college savings plan, which was normally used by parents and grandparents to save money to build their children’s college funds.
When he retired in the 60s, he and his wife studied ecology in a New Jersey community college with ease. Their tuition amounted to $25,000. The good news? They didn’t pay a penny for it thanks to their 529 savings plan! A decade later, more and more financial advisers direct their retirement-focused clients into getting 529 plans. Want to know how it works? Here’s how.
The College Savings Plan
According to financial experts, the 529 college plan offers a powerful advantage over other savings, retirement funds, and brokerage accounts because most of the contributions you make will grow tax-free every year. This lets you maximize your savings as you take advantage of the compounding interest, unlike in other retirement funds where your actual savings deplete due to the compounding fees and taxes you need to pay for.
Retirees who want to pursue a new skill can take advantage of this plan.
One of Loewe’s clients named Laurie Alter, for example, put her career on hold while raising her five children and sent them to college. Thanks to her 529 savings plan, her children went to college without draining their pockets or taking out a student loan. Now at 60, Alter plans to go to law school next year. She will then use her 529 savings plans to fund her education, and the leftover will be used to pay her bills.
Unfortunately, you need to know the rules first before signing up for the 529 plan to make sure you don’t land any penalties. While it’s unnecessary to get a degree, the 529 plan at least requires the students (or the beneficiaries) to enroll in credited classes or technical certificate programs in eligible educational centers so as to access the 529 funds without a penalty.
Retirees who want to pursue a skill like cooking, baking, learning a new language or skills or even take a new course can take advantage of this plan.
The money taken from a 529 plan intended for other purposes will be listed as unqualified expenses. Thus, every withdrawal made will be taxed and hit with a 10% penalty and charged. For example, airfare fees are typically uncovered by the plan.