You know about the possibility of getting a match for your 401(k) contributions, but did you know you can get a match for 529 Savings Plan contributions as well? Several state-run 529 programs offer a match. While you might not meet the eligibility requirements for these particular programs, you still might be able to get a match through similar programs.
While the cost of attending a four-year private college is enough to dash your hopes of financing your childâ€™s education, a disciplined savings plan can help alleviate the financial burden. Financial experts say in addition to benefits such as tax-deferred growth, and federal income tax-free distributions, you may also be eligible to receive free money in the form of a match for your 529 Plan contribution.
Mark Kantrowitz, publisher of FinAid.org and Fastweb.com, says matching grants have been around for about a decade, and are usually disbursed by state-sponsored 529 plans. Those applying for matching grants must be residents of the state, and must meet all income guidelines.
For example, Missouri offers a dollar-for-dollar match up to $500 per year for residents with an adjusted gross income of $74,999 or less. The most a beneficiary can earn is $2,500. Some states offer even more to those with lower incomes. In Arkansas, those who earn less than $30,000 can receive $2 for every $1- up to $500. Other states like Louisiana will match up to 14% of annual deposits, depending on income.
If youâ€™re ineligible to receive a state-based 529 match, other options include rewards programs like Upromise, a national college savings rewards program that offers up to 25% back on qualified purchases. The program is free, and as you spend, you can have rewards rolled from your Upromise account over to your 529 plan.
â€śYou donâ€™t have to have all of college saved for to benefit from a 529 plan,â€ť says Michael Fitzgerald, Iowa state treasurer and past chairman of the College Savings Plan Network. â€śStart with a year, or even a semester.â€ť
Those looking to open a 529 plan should always start by researching what their home state has to offer, says Fitzgerald. Thirty-four states offer plans with tax incentives such as state income tax deductions in addition to the standard federal tax-free distribution. In Colorado, all annual contributions are deductible from state taxable income unless non-qualified withdrawals are made. In some states there is no minimum contribution; others can require as much as $1,000. Other factors to consider when selecting a plan are fees. Kantrowitz says ideally, fees should be less than 1%.
Joe Hurley, aÂ 529 savings plan expert, suggests selecting an age-based option, which is more aggressive with stocks when the child is young, but becomes more conservative as he or she gets closer to college age. He says while thereâ€™s never a guarantee that money wonâ€™t be lost, this option can help protect money earned over the years. Kantrowitz says this option usually starts off with a portfolio made up of 80 % in stocks and ends with about 20%.