Hey Reader,

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Time to check in on your finances!

Consider this your monthly reminder to update your Net Worth -- an easy way to track your financial progress. 📈

Need the Money Meeting Agenda?

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Money Fit Challenge for AUGUST: Calculate the monthly amount to save for kids' college expenses

MAKE SURE TO CONSIDER THE RULE CHANGE HAPPENING IN 2024! (Highlighted below)

⚠️ REMINDER: BEFORE Saving for Kid's College Fund:

1. Payoff DEBT AND

2. Get on track for RETIREMENT ​

Why? Although student loans aren't ideal, there's no such thing as a retirement loan.

As we're reminded every time we fly, ✈️ put on *your* oxygen mask first so you can safely assist others.​

Y'all . . . a study showed it's taking students an average of 20 YEARS to pay off the loan for their undergraduate degree!!!!! 😱 Even if *you* didn't face that issue, your *kids* might. U.S. College tuition is inflating at TWO TIMES the general U.S. inflation rate.

What is a 529 Plan?

An invested, tax-advantaged way to save for college. An invested tax-advantaged 529 plan could grow more than a basic savings account (depending on investment returns).

The sooner you contribute to a 529 plan, the more contributions can grow.

Our son's 529 is currently worth $11,555, but we only contributed $7,245. The rest (36%) is investment growth -- and that percentage will GROW. 🌱

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We set up a $25/mo auto-deposit (with an extra $100 on his birthday). A few years ago, we increased to $125/mo. The rest is investment growth.

As you can see (in a classic investment curve), there are fluctuations in the market, but generally (especially if you set up auto-deposits), the growth curve gets steeper over time thanks to compound interest.

​​Why I love 529 Plans

Contributions GROW federal tax-free and can be DISTRIBUTED federal tax-free IF USED FOR QUALIFIED EDUCATION EXPENSES*

• *States generally follow federal rules, but some rules differ.

529 Plans can be used for:

• Some K-12 tuition (see rules for state/federal limits)
• Undergraduate degrees and many technical schools
• Graduate, Professional degree, etc.

What if my child does not go to college? Is that money recoverable?

You have a few options:

1. Rollover to a Roth IRA (NEW! Starting in 2024)

Secure Act 2.0 will allow rollovers from 529 Plans into a Roth IRA -- this is AMAZING news since contributing too much used to be a concern.

Some limitations:

• The plan must be >15 years old.
• Rollovers are subject to Roth IRA Annual contribution limits (e.g. as of 2023, this annual limit was $6,500/year)
• $35,000 is the maximum lifetime rollover amount allowed
• Roth IRA must be in the name of the 529 beneficiary
• Can’t rollover contributions or earnings made in the last 5 years (would have to wait until they’ve been in the account > 5 years)
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2. Name a new beneficiary for the 529 Plan

Instead of rolling over to a Roth IRA, you could keep in the 529 plan and change beneficiaries to another relative (e.g. a younger sibling).

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3. Pay the penalty and taxes

Note that if you withdraw funds for a purpose other than qualified education expenses, the earnings will be taxed and assessed an additional 10% federal tax -- not ideal. I'd recommend option 1 or 2. ​

Calculate your Monthly Contribution to Each Child's Fund:

OPTION 1: If you already have an Empower Account (create a free account), you can add college expenses to your Retirement Planner.

1: Go to Planning: Retirement Planner

2: Add a Spending Goal: Education Expenses

3: Follow prompts to complete calculation

​Create a FREE Empower Account - Retirement / College Savings Plan ​

What I love about Empower: You can link your kids' actual 529 Plans (and the rest of your investment/retirement accounts), so your calculations are updated in real-time.

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OPTION 2:

Use another college savings calculator (I put a couple of calculators at the end of this post about 529 plans).

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🤔 DON'T OVERTHINK IT.

Like I said, we started with $25/month per kid and re-evaluated down the road.

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Have more QUESTIONS about 529 Plans?

Check out my post about 529 Plans. 🙌🏼

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Can't-stop won't-stop calculating things,