Employees Welcome Summer with Sunshine, Hamburgers, and... College Savings?

529 College Savings
Memorial Day weekend is widely considered the unofficial kick-off to summer. Though we at College Coach like barbecues and beach escapes as much as the next guy, we chose to celebrate a much lesser known holiday last week.

529 Day: College Savings Awareness for Working Parents

529 Day, named for the federally tax-advantaged 529 college savings account, is observed each year on May 29th (5/29, get it?) to help remind busy parents to set aside a portion of their income, so easily eaten up by everyday expenses, for college savings. In honor of 529 Day, College Coach finance expert Robert Weinerman recently addressed the anxiety that many parents have about saving in a college-specific account such as a 529:

In almost every discussion we have, people ask "What happens if my kids don't go to college?" It's a great question to ask, because there are taxes and penalties that apply when people withdraw money from 529 Savings Plans but cannot match the withdrawal to college costs for the plan's beneficiary.

The canned answer to this questions is, "The earnings portion of the withdrawal will be subject to ordinary income tax, and unless the beneficiary received a scholarship or military academy appointment with a value less than or equal to the size of the withdrawal, an additional 10% penalty will be assessed. In addition, if the account owner got a state tax deduction when they made the contribution, they may have to pay their tax savings back to the state."

Because this is a complicated sentence with a lot of words, people tend to think the non-use consequences of a 529 Savings Plan are harsher than they really are.

Robert goes on to describe how 529 college savings accounts are not "use-it-or-lose-it" and that, since taxes and penalties only apply to the earnings portion of the account when not used for college, account owners will nearly always get their contributions back plus most of their earning seven in the worst case scenario. Read Robert's full post here for a closer look at 529 Savings Plans and their non-use penalties.

Finding the Right 529 College Savings Strategy

So while 529 accounts will not be the right college savings vehicle for every working parent, we at College Coach encourage employees to weigh the costs and benefits of all college savings options realistically, so that undue anxiety does not prevent them from achieving their financial goals. We don't sell financial products rather, we provide unbiased advice so that employees can make the best financial decisions for their families, avoid unnecessary stress and distraction at work, and experience the increased job satisfaction that comes with working for an employer who supports their financial goals and work/life effectiveness.

We hope that employers will join with us at College Coach in celebrating and encouraging saving for college among employees. It may not be hot dogs and beach volleyball, but I can't think of a better way to start the summer.
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About the Author
Bright Horizons
Bright Horizons
In 1986, our founders saw that child care was an enormous obstacle for working parents. On-site centers became one way we responded to help employees – and organizations -- work better. Today we offer child care, elder care, and help for education and careers -- tools used by more than 1,000 of the world’s top employers and that power many of the world's best brands
529 College Savings

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