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Mauch Chunk Trust
Mauch Chunk Trust is an independent wealth management firm dedicated to helping clients find solutions to their financial concerns. We understand how daunting financial planning can be in an ever-changing climate, and we are here to help. Our company offers comprehensive investment management and financial strategies tailored directly to you and your goals. We pride ourselves in seeing our clients grow, so our plans will always be customized to your unique needs. Let us help you create a financial strategy that you can trust.
What is a 529 Plan?
College savings plans, often referred to as 529 savings plans, help cover education expenses when it is time for your child to enter college. Transitioning to college life is a hectic time for parents and children without the added stress of financial trouble. Saving for college early on in your child's life means less time worrying about covering expenses and more time celebrating the milestone your child has reached. If you feel overwhelmed by the process of choosing a savings plan, speaking to one of our financial advisors can help you find the option that fits your family. Whichever option you choose, a college savings plan is one of the first steps towards a safe and secure college experience for both you and your child.
PA Plan Options
Pennsylvania currently sponsors two tax-advantaged college 529 savings plans: an investment plan with underlying Vanguard funds and a prepaid tuition program. It is possible to invest in one or both of these plans. They can hold a combined maximum of $511,758 - among the highest caps in the U.S. Pennsylvania is also one of the most generous states when it comes to deductible contributions, allowing families to deduct up to $30,000 from their state taxable income when it comes to 529 plans.
PA 529 Investment plans include the deductible contributions of up to $30,000 from state income tax returns, are exempt from Pennsylvania inheritance tax, and the money in the plan has no impact on student eligibility for financial aid. It does not cost much to open an account (as little as $25) which means you can begin saving at any time. Additionally, there exist seventeen investment options that automatically change asset allocation to become less risky as your child approaches college age.
Portfolios in the PA 529 Investment Plan charge a total annual asset-based fee ranging from 0.215% to 0.315%. These fees are factored out of assets in the entire portfolio you invest in, which means your account will bear no pro-rata share. An annual $10 annual account maintenance fee will also be charged unless you choose to have all documents received electronically.
PA taxpayers have the opportunity to deduct up to $15,000 per beneficiary per year from their Pennsylvania state taxable income. Married couples have the chance to deduct $30,000. The money in this plan will also continue to grow tax-free over time, and money withdrawn from the account is tax-free as well as long as it is used for qualified higher education purposes. In the event that you need to use money from your plan to pay for tuition at private K-12 schools, you are permitted to withdraw $10,000 tax-free annually from your account.
Prepaid Tuition Program
Pennsylvania currently offers a prepaid tuition program known as the Guaranteed Savings Plan (GSP). With a GSP, your benefits will not be tied to the market and subject to risks in shifting market value. Instead, you have the opportunity to purchase a portion of education costs ahead of time at today’s price. You can choose from five levels: PA Community college, Ivy League universities, state universities, community colleges, and other private universities. In the future, your child can redeem these credits regardless of whether or not the tuition has increased by the time they reach college age.
Your contributions to the program depend on the tuition level you choose and the GSP credit at the time of your child's enrollment. If you need to change your tuition level (if your child decides to attend a university rather than a community college) your GSP will adjust to match the rates from when you first opened the account. A 0.40% account maintenance fee is also applied and deducted from your account quarterly with an annual cap of $500.
The tax benefits of a GSP are the same as those listed in the 529 investment plans, which means you have tax-exempt growth on your contributions tax-free withdrawals for higher education expenses. As a result, you have peace of mind knowing you can choose the plan that best fits your family without worrying about losing out on certain tax benefits applied to other plans.
How We Can Help
Choosing a college savings plan can be a complex process. Determining which option best fits your financial situation is an essential step towards finding the right fit. The decision between investment plans and prepaid tuition plans is not the only choice parents are faced with. For example, investment plans require choosing between investment options and deciding on the risk level you’re willing to be subject to. Our financial advisors will help you navigate the waters of investment options and savings plans by tailoring your college savings experience to your unique needs, and monitoring them so that they continue to grow as your child does.