With the rapidly evolving impacts of COVID-19 on daily life, the College Savings Plans Networkunderstands the fear and anxiety facing all Americans today. We are all in this together, and we choose calm and hope as the best ways to face these uncertain times.
It is important to keep in perspective that your child’s dreams and your goals for their future are long-term and boundless. Staying the course is an essential part of keeping those dreams moving forward.
As Americans, we have faced crises and disasters before, and we are resilient and we will recover. While this situation is uncharted, we hope to emerge and flourish like we always do.
Your financial educational goals for your children and grandchildren are our core mission at CSPN. While we are prioritizing public safety and abiding by social distancing recommendations, we remain committed to serving you. We want to be your trusted resource for information about 529 College Savings Plans.
For more information, visit www.CollegeSavings.org
HELPFUL TIPS
New 529 Contributions
While we weather this pandemic, adopt a “do-what-you-can” mantra for continuing to save for college. If you’re not able to contribute as much to your 529 as you did previously, that’s okay. Give yourself a break. If it’s doable for you, even just setting aside $5 to $10a week to invest in your 529 can add up over time. Though no one can guarantee exactly what the market will look like tomorrow, keeping your future goals in mind is important – just as it is with retirement.
Refunds from Colleges
College students and parents who receive refunds for tuition, room and board, or other qualified expenses can re-contribute their refund back into their 529 plan account within 60 days of the date of the refund to avoid paying any penalty or taxes on the earnings. Be sure to check how a refund contribution may be treated under the laws of the state where you pay taxes.
Beware of Scammers
Unfortunately, scammers will use any means they can to try to take people’s money – especially during times of crisis when you are trying to manage the situation and your attention may be elsewhere. Be on guard against scams of all kinds. If someone reaches out to you claiming to represent a 529 plan, please hang up and contact your plan directly.
Frequently Asked Questions
What will happen to the money I invested in a 529?
If you have been saving for college with a 529, you may have a lot of questions right now. With long-term investments, market downturns happen and so do recoveries.
Your child’s dreams and your goals for their future are long-term and boundless. As you evaluate your savings and investment goals, it’s important to keep your savings time horizon, risk tolerance, and overall objectives in mind.
Should I take money out of a 529?
If you withdraw money from your 529 account for nonqualified expenses, you will pay taxes on the earnings portion of that withdrawal and may also be subject to a 10 percent penalty. There also may be state and local taxes and/or penalties that would apply.
When considering an investment change or withdrawal, it’s important to remember that liquidating your assets or switching investments may lock in losses if markets rebound.
Because investing and making changes to those investments is an important decision, you should consult your tax or investment advisor about your particular circ*mstances.
Should I change my asset allocation?
Given recent market volatility, it’s important to remain calm and evaluate your risk tolerance, savings time horizon, and overall investment goals when considering investment choices. In doing so, be sure to carefully review the options in which you are invested and available alternatives before making any changes
In general, the majority of 529 plans offer age-based investment options, which are designed to balance risk and return in light of the beneficiary’s age.
Most plans offer many other types of investments as well, ranging from ones that are FDIC insured to fixed choices such as 100% equity. Your savings time horizon, risk tolerance, and investment objectives will help you determine whether a change is in order. Keep in mind, however, that changes to existing investment options can be made only twice per calendar year or upon change in the beneficiary.
Because investing and making changes to those investments is an important decision, you should consult your tax or investment advisor about your particular circ*mstances.
What if my child is about to go to college?
If your child has a 529 account and is in college or about to attend college, talk to someone with the school’s financial office about all options available to you to cover the costs of the coming semester. Initiating the conversation early will give you an idea of how to proceed once classes resume.
Should I keep investing in a 529 plan right now?
Though no one can guarantee exactly what the market will look like tomorrow, taking steps to prepare for the future can be beneficial in college savings just as it can be with retirement. If you are in a financial position to do so, continuing to invest in a 529 plan now may benefit you in the long run.
