05-23-2019 Columns

If you want to help pay for your children’s college educations, you might want to consider contributing to a 529 plan. With this plan, your earnings grow federally tax-free, as long as the withdrawals are used for qualified higher education expenses such as tuition and room and board. Yet, you may have heard some things about 529 plans that are keeping you from investing in one. However, these concerns may be more myth than reality – so let’s take a look at a few of them. “I need a lot of money to contribute to the plan.” This myth has essentially no truth to it. Typically, only a modest amount is required to open your 529 plan, and you can generally transfer small sums to it from your checking or savings account. “If my child doesn’t go to college, I lose out on the money I’ve put in.” This myth runs counter to one of the 529 plan’s greatest benefits: flexibility. If you’ve named one child (or grandchild) as a beneficiary of a 529 plan, and that child or grandchild decides against pursuing higher education, you can simply change the beneficiary to another eligible family member. Furthermore, if none of your intended beneficiaries will need the 529 plan, you can name yourself the beneficiary and use the money to take classes or receive some other type of qualified education opportunity. In a worst-case scenario, in which the money is never used for education, you will be taxed on the earnings portion of the withdrawals – but had you never contributed to a 529 plan, the funds would have been taxed, anyway. (However, you might be subject to a 10% penalty tax, in addition to regular income taxes, again on the earnings portion of the withdrawals.) “I have to invest in my own state’s plan.” Not true. You’re free to invest in the 529 plan of any state, no matter where you live. But it could be advantageous for you to invest in your own state’s plan, as you might receive some tax breaks for state residents. (The tax issues for 529 plans can be complex, so you’ll want to consult with your tax advisor about your situation.) Investing in your own state’s plan also might provide access to financial aid and scholarship funds, along with possible protection from creditors. “A 529 plan will destroy my child’s chances for financial aid.” While a 529 plan could affect your child’s financial aid prospects, it might not doom them. And the benefits of building significant assets in a 529 plan could outweigh the potential loss of some needs-based financial aid. Before investing in a 529 plan, you’ll want to explore it thoroughly, as you would any investment. You can find details about a 529 plan’s investment options, share classes, fees, expenses, risks and other information in the plan’s program description or offering statement, which you should read carefully before making any purchasing decisions. But, in any case, don’t let “myths” scare you off from what could be one of your best college-savings vehicles. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, its financial advisors and employees cannot provide tax or legal advice.

Let’s finish this

For decades, special interests have profited off of our broken insurance system while hard-working Michiganders have had their wallets drained. While knocking on thousands of doors in our community, the need to deliver auto-insurance relief was the number one issue I heard about – by far. Earlier this month, my colleagues and I succeeded where so many previous attempts have failed. The House passed a bipartisan auto-insurance reform package that will finally provide consumers with options and deliver rate relief for all Michigan drivers. When the Senate passed their insurance reform bill, Governor Whitmer threatened a veto because it did not guarantee rate relief and allowed companies to unfairly discriminate in setting rates by basing them off of non-driving factors. After thirty years of debate and sixteen weeks of committee hearings lead by Representative Wentworth, the House was ready to address the Governor’s concerns in our bill. House Bill 4397 includes guaranteed rate relief for all levels of insurance coverage. This guarantee will slash rates for every single Michigan driver and put more money back into the pockets of every member of our community. This legislation will literally put billions of dollars back into our communities. For the first time, long-lasting and meaningful auto-insurance reform is at our fingertips. Speaker Chatfield, Majority Leader Shirkey, and Governor Whitmer continue to negotiate in good faith towards a solution that will truly benefit every Michigan driver. Crippling insurance bills aren’t a partisan issue. They affect every single Michigan driver, and it’s time your state government did something about it. I’m incredibly hopeful that a compromise is reached, and I look forward to voting in favor of any legislation that reduces insurance rates for Michigan drivers. If I can ever be of assistance to you, you can reach me via email at PaulineWendzel@house.mi.gov, or by phone at 517-373-1403.

Budget update

The Senate last week approved its recommended state budget for the coming fiscal year. I was happy to vote in support of this spending plan because it keeps with our commitment to further invest in key priorities, including our children’s education and the state’s infrastructure. Importantly, this budget would ensure state government lives within its means for a