At the State of the Union, President Obama proposed limiting the tax advantages of 529 college savings accounts. If youâ€™re an affluent college parent, you probably already know this. If youâ€™re not a parent and/or you are not affluent, you probably said â€œHuh? What is a 529 account?â€ Which rather exemplifies the problem.
I have 529s for both of my daughters. I recommend these to all my friends with children. These accounts allow you to accumulate tax-free investment gains to help finance your kidsâ€™ college. These also provide a good mechanism for relatives to chip in on birthdays and holidays. Given time to accumulate interest, a few hundred dollars a year from Grandma can easily accumulate to cover a whole semester at a state college. 529s provide a convenient nudge to help you save more, too, though the net impact of such tax-advantaged savings vehicles appears to be quite limited.
The presidentâ€™s proposal produced an entirely-predictable uproar among affluent families and within the industry of financial and college-savings advisors. Â Leading Democrats such as Nancy Pelosi and Charles Schumer immediately ran from the proposal.Â Political heat was so intense that President Obama was forced to beat a hasty retreat and to abandon the proposal….