A Simple Plan to Lower Your Taxes and Boost Your Returns
Andy Snyder|June 4, 2021
Golly… it seems like a politician is forgetting about his promise.
We won’t name names here, but a certain fella who lives in a certain neutral-colored house earned himself a slew of votes by promising to forgive a big chunk of student debt.
“I’m going to make sure everyone gets $10,000 knocked off of their student debt,” this certain somebody said back in November.
“It should be done immediately.”
But time marches slowly in the nation’s capital. Nothing has been done, and last week’s big budget proposal doesn’t even mention it.
Nope. Sorry, pal.
No forgiveness in sight… just a slew of new taxes.
That means – something we’ll always applaud – it’s up to the individual to take care of himself. If you want something, pay for it yourself. And if you took on debt, you’ll have to pay it back yourself.
As we all know, two of the riskiest (and often dumbest) financial decisions today’s generation of youngsters face are whether to go to college… and how to pay for it if they do.
If they make poor decisions, they’ll be riddled with debt (with monthly payments that can easily rival a mortgage) and earn a degree that’s virtually useless… like (gulp) puppetry or bowling management.
The fact that few folks want to fix the root of the problem is one of the greatest threats to American kids.
But a little-understood strategy can provide major help. It’s an especially critical topic right now… when it’s quite clear that taxes are on the rise.
Most serious investors have heard of 529 plans. But few realize their true power.
They are not just for young parents. Far from it.
They’re perfect for grandparents… aunts… uncles… anybody who wants to boost their economic fate by lowering their taxes.
Washington Did Good?
Congress created the plans in 1996 as a way to spark interest in saving for college education.
Earnings generated through the plans are not subject to federal taxes and, in most cases, are not subject to state taxes when the money is used to pay for necessary college expenses (the list of qualified expenditures is actually quite expansive).
Right off the top, that could boost your profits by as much as 20%… or 40% if the folks in D.C. get their way.
And in at least 34 states, the tale gets even better.
School the Taxman
You can deduct 529 contributions from your state income tax each year. Because we live in Pennsylvania, we can deduct as much as $28,000 worth of income… per beneficiary.
And what’s really powerful is that the law allows you to transfer funds from one beneficiary to another without triggering a taxable event.
In other words, in many instances it makes sense for investors to open a 529 plan just for the annual deduction on their state income taxes.
They may never use the money, but it can easily be withdrawn (you always remain the owner of the funds) or transferred to their children or grandchildren. Many states offer 529 plans that also provide appealing inheritance and gift provisions.
Another rather unknown benefit of these plans is that you can open an account in any state. You’re not locked into your home state’s plan.
We recommend looking at Utah’s plan. It allows savers to invest in a wide array of assets, including ultra-cheap Vanguard funds. Its most expensive option comes with an annual fee of just 0.38%.
The bottom line is that your kids, your grandkids… and even your neighbor’s kids are likely going to college.
And it will be expensive… no matter what the folks in Washington promise.
If you manage it poorly, your kids could start their working lives overwhelmed with debt. It could ruin them.
If you manage it wisely, though, you can invest in their education while lowering your tax burden along the way.
Again, taxes are on the rise.
A 529 plan is a smart way to avoid some of the pain.
Andy Snyder is the founder of Manward Press, the nation’s premier source of unfiltered, unorthodox views on money and what it means for a free society. An American author, investor and serial entrepreneur, Andy cut his teeth at an esteemed financial firm with nearly $100 billion in assets under management. Andy and his ideas have been featured on Fox News, on countless radio stations, and in numerous print and online outlets. He’s been a keynote speaker and panelist at events all over the world, from four-star ballrooms to Senate hearing rooms. Today, Andy’s dissident thoughts on life, liberty and investing can be found in his popular daily newsletter, Manward Financial Digest.