529 plan funding data in all states across the United States
Let’s talk about the specific operations of two types of 529 plan .
- Prepaid tuition fees : As the name suggests, it means purchasing credit fees from public and private universities in the state in advance to resist the increase in tuition fees. For example, Xiao Ming is two years old and is 16 years away from going to college. As shown in the figure below, by the time he went to college, the tuition fees for public institutions would be nearly 200,000 yuan in four years and the tuition fees for private institutions would be nearly 450,000 yuan. Xiao Ming's parents, grandparents helped him purchase credits from a university in the state that meets the requirements for 16 years in advance for the credit fee when he was two years old.
This money is managed by the state government, and investment in mutual fund or bonds is made in the state government’s trust. The limitation of this plan is that if Xiao Ming is admitted to a school outside the state or not among the planned cooperative institutions in the future, the pre-deposited tuition fee will be discounted.
JP Morgan University Tuition Forecast Data Table
- Savings Plan : The second type of plan is equivalent to a Roth IRA specially made for higher education. The funds placed in the savings plan will be invested by the state government in designated mutual funds and bonds. Strictly speaking, individuals are not allowed to invest, and they can only choose the investment ratio within the plan.
According to data provided by financial services company Morningstar, the existing 529 plan , the selected portfolios in each account range from 5 to 345, and the average portfolio of each account is about 20. More than 60% of these investments are in the stock market. There are also small amounts of bonds and cash.
529 Portfolio
How to choose and buy 529 plans?
529 plan can be purchased directly from the state government or from a bank or financial planner. In terms of
charging, since the 529 plan has a wide distribution channel and there are many options for investment portfolios, there is no unified standard. The plan for direct purchase of
has different service fees and expenses accounting for between 0.13% and 1.05% of the total amount, and the cost of opening an account in third-party institutions accounts for between 0.58% and 1.88% of the total amount. The fees charged by different plans are different. This year, the US financial regulatory agency (FINRA) has made a splash through major media and began to strengthen supervision of the 529 plan charges of major agencies.
2019 news on strengthening the supervision of 529 plan
quota limit : The money placed in 529 tuition savings plan every year has a "reasonable online". This is usually the estimated future tuition fee, with the highest amount of tuition fees for the most expensive private universities in the United States.
Tax aspect : The money placed in 529 plan is after-tax cash. If the growth benefits are used for higher education, tuition, living and book fees, tax-free benefits will be enjoyed.
beneficiary : The gift is not necessarily the family of the beneficiary, and anyone can give it money. The account is managed by an adult, and the beneficiary is usually the person who will use this tuition fee. Can be changed every year.
Source: For student loans, Federal Reserve Bank
In the above picture, we can basically see that the increase in education fund plans and student loans is basically the same proportion, and the exception occurred in 2008. The stock market fluctuations and financial crisis in 2008 led to a shrinking of funds invested in bonds and mutual funds in 529 Plan 4, and the education savings gold also decreased. If the child is going to college this year and the family cannot afford to pay more budgets, he may need to take some student loans.
6. Cash value life insurance education fund plan
Cash value life insurance started to enter the market around the 1940s. Later, different types of products emerged due to the development and evolution of the market. Among them, the index universal insurance IUL that appeared after 1997 has gradually been used to plan education funds for children due to its flexibility in deposits and withdrawals, guarantee functions and some favorable advantages of income tax exemption.
American Life Insurance Guide Network
First of all, I want to emphasize the most important function of life insurance, and the original intention of every policyholder is to protect the family and lover. Commercial insurance bears the burden of government medical care and pension, and accordingly provides policyholders and beneficiaries with tax-free benefits and high leverage "rewards".
There are more than 800 insurance companies in the United States, each company has different products and different investment strategies. It is impossible for us to compare one by one in this article. Taking index products as an example, there are usually strategic choices to benchmark S&P 500 and do not directly participate in the market. When the market is good, the profit growth will be capped (about 10%-12%), and when the market falls, the guaranteed profit will be 0%.
Taking the stock market investment income and policy income trends of depositing $100,000 in 1998 as an example,
There are different policy design methods for different ages. Take a 3-year-old boy as an example:
- A company has an insurance policy of 1 million, and deposited $8,000 a year from the age of 3, for 15 years.
- 18-21 years old can spend $40,000 per year to supplement education funds. The money of
- does not affect the application for scholarships.
- 30 years old can take out $75,000 as the top payment for a house or start-up capital. html You can also pay more than $150,000 in tax-free pensions every year at the age of 665, and you can get them until you are 90 years old.
- Different families have different budgets and children’s ages, and they can be customized.
limit : The annual maximum deposit of each policy is determined by the IRS IRS, and it varies according to the age of the insured and the denomination of the policy. The basic rule is that the larger the insured amount, the larger the amount, and the larger the age.
Tax : The money placed in the policy is after-tax cash, and the policy cash value shall not exceed the maximum amount specified by the IRS for each policy.
beneficiary : The child is the policy holder before he or she is an adult, and can be transferred to the child after he or she is an adult. Insurance policies provide protection and cash value accumulation throughout their lives, and the compensation for the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the birth of the descendants.
summary
From the four methods of Custodial Account, Coverdell savings account/ESAS, education bonds, and education savings trust introduced in the previous article, to the 529 plan and the use of life insurance cash value to make education plans are all relatively mature solutions in the US market. If you need to plan your children's education fund based on your family's financial situation, please seek a professional broker for designing a plan.
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