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College Prep: Five Reasons to Study Up on 529 Plans

Millions of families striving to meet the mounting costs of college have flocked to 529 college savings plans.

For most investors, the plans' main attractions are the potential for federal tax-deferred earnings growth and federal tax-free qualified withdrawals.1 The plans' aggregate asset limits, which often exceed $200,000, also appeal to contributors concerned about the potential for a six-figure price tag on a four-year degree. But a closer look at the rules governing 529 plans may reveal other attractive reasons to consider putting them to work as you make one of your most important investments — in your child's or grandchild's future.

Avoid federal gift taxes and accelerate giving — You can contribute up to $13,000 (or $26,000 if you and your spouse give and file jointly) to a 529 plan each year without owing federal gift taxes, provided you haven't made other financial gifts to the plan beneficiary in the same year. In addition, you can elect to make a lump-sum contribution of up to $65,000 ($130,000 for married couples filing jointly) in the first year of a five-year period, provided you don't give the beneficiary additional taxable gifts during the five-year period.2

Create an educational funding legacy — A 529 plan offers the owner control over the plan, including flexibility in naming and changing its beneficiary. The beneficiary can be any age and generally can be changed to a qualified relative when needed. For example, if the original beneficiary decides not to attend college, you can designate a new beneficiary. This flexibility may enable you to establish a college funding legacy for current and future generations. For example, you could open a 529 plan account to pay your child's college bills. Then, if there's money left over after he or she finishes college, you can change the beneficiary to another qualified family member and perhaps later to a grandchild.

Consolidate assets — Consolidating college funding assets for one beneficiary in a single 529 plan can make them easier to manage. Depending on plan rules, you may be able to arrange transfers from a Coverdell Education Savings Account, a custodial account or another 529 plan without triggering federal income taxes. Be sure to review the tax implications with a tax professional, however. Transfers of assets from Series EE and I bonds may also be allowed under certain conditions.

Maximize financial aid eligibility — Money in a 529 account is usually considered by colleges to be the account owner's asset, which often means the parents' asset. As a result, a maximum of 5.6% of the balance is generally assumed to be available for college annually, compared with 35% if the assets were the student's. With a custodial account, on the other hand, the assets are considered the student's. And according to the Department of Education, qualified distributions from a 529 plan are not counted as parent or student income and therefore do not affect aid eligibility.

Look into state tax savings — Depending on the state you reside in, plan contributions to that state's 529 plan may be eligible for state tax deductions. Don't overlook this potential benefit when choosing a plan.
There may be other advantages of 529 plans to consider, as well. Be sure to talk with your financial advisor and tax professional for help assessing how a 529 plan may affect your tax situation.

1The earnings portion of nonqualified withdrawals is subject to federal income taxes, a 10% federal tax penalty and possible state taxes and penalties.
2If you die before the end of the five-year period, a prorated portion of the contribution will be considered part of your taxable estate.

Section 529 plans are established and maintained by state governments or agencies or eligible educational institutions. Contributions must be kept in a qualified trust in order to be treated as a qualified tuition program.

You should consider a 529 Plan’s fees and expenses such as administrative fees, enrollment fees, annual maintenance fees, sales charges, and underlying fund expenses, which will fluctuate depending on the 529 Plan invested in the investments chosen within the plan.

© 2010 Standard & Poor's Financial Communications. All rights reserved.

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Personal Banking Security Measures for the 21st Century

clientuploads/21st-Century-Securitysquare180.pngMany of us are constantly connected to the online world these days. This means that the potential is there for our computers and personal information to be compromised which greatly increases the risk of ID theft and financial fraud to occur. However, by taking some basic precautions you can significantly reduce the risk of your computing environment being compromised. Following these simple guidelines should help your computing environment become more secure:

Keep your computer and software up-to-date

Keep your computers and network equipment secured with the latest software updates and enable automatic updates whenever possible.  This includes updates to third party applications such as Java and Adobe Products.  

Use hard drive encryption

In the event your machine is lost or stolen, drive encryption can prevent others from accessing the data on your hard drive.  The purpose is to encrypt or scramble your data on your machine so that it can only be read with your encryption key.Many operating systems offer drive encryption.  Microsoft offers Bitlocker and Apple has FileVault. There are also other third party encryption offerings.   

Enable your firewall

Think of the firewall to your computer as the fence around your property.  If there were multiple holes cut in the fence, it wouldn’t be very useful at keeping people out.  Firewalls are typically enabled by default on Windows machines, but double check to make sure it’s on.  Here are instructions to do so if you are using Windows 7. Only allow necessary applications inbound access through your firewall. The same principles apply to your network firewall. 

Configure your screensaver

Set an auto-locking screensaver so your account gets locked out after a few minutes.  This is useful if you forget to lock your machine when are away from it. On Windows machines this can usually be done by pressing the “Windows Key” and the “L” button simultaneously.

Make your passwords stronger

The longer and more complex the password, the better.  At least 16 characters with a combination of upper and lowecase letters, numbers, and special characters is a best practice.

Configure your router

Use the strongest wireless security available (currently WPA2-CCMP) with a long and complex password for your wireless network. Disable WPS on your wireless router for greater security.   

 


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If you suspect that your personal financial information has been compromised, call MutualBank Customer Support at 800-382-8031.


 

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College Prep: Five Reasons to Study Up on 529 Plans

Millions of families striving to meet the mounting costs of college have flocked to 529 college savings plans.

For most investors, the plans' main attractions are the potential for federal tax-deferred earnings growth and federal tax-free qualified withdrawals.1 The plans' aggregate asset limits, which often exceed $200,000, also appeal to contributors concerned about the potential for a six-figure price tag on a four-year degree. But a closer look at the rules governing 529 plans may reveal other attractive reasons to consider putting them to work as you make one of your most important investments — in your child's or grandchild's future.

Avoid federal gift taxes and accelerate giving — You can contribute up to $13,000 (or $26,000 if you and your spouse give and file jointly) to a 529 plan each year without owing federal gift taxes, provided you haven't made other financial gifts to the plan beneficiary in the same year. In addition, you can elect to make a lump-sum contribution of up to $65,000 ($130,000 for married couples filing jointly) in the first year of a five-year period, provided you don't give the beneficiary additional taxable gifts during the five-year period.2

Create an educational funding legacy — A 529 plan offers the owner control over the plan, including flexibility in naming and changing its beneficiary. The beneficiary can be any age and generally can be changed to a qualified relative when needed. For example, if the original beneficiary decides not to attend college, you can designate a new beneficiary. This flexibility may enable you to establish a college funding legacy for current and future generations. For example, you could open a 529 plan account to pay your child's college bills. Then, if there's money left over after he or she finishes college, you can change the beneficiary to another qualified family member and perhaps later to a grandchild.

Consolidate assets — Consolidating college funding assets for one beneficiary in a single 529 plan can make them easier to manage. Depending on plan rules, you may be able to arrange transfers from a Coverdell Education Savings Account, a custodial account or another 529 plan without triggering federal income taxes. Be sure to review the tax implications with a tax professional, however. Transfers of assets from Series EE and I bonds may also be allowed under certain conditions.

Maximize financial aid eligibility — Money in a 529 account is usually considered by colleges to be the account owner's asset, which often means the parents' asset. As a result, a maximum of 5.6% of the balance is generally assumed to be available for college annually, compared with 35% if the assets were the student's. With a custodial account, on the other hand, the assets are considered the student's. And according to the Department of Education, qualified distributions from a 529 plan are not counted as parent or student income and therefore do not affect aid eligibility.

Look into state tax savings — Depending on the state you reside in, plan contributions to that state's 529 plan may be eligible for state tax deductions. Don't overlook this potential benefit when choosing a plan.
There may be other advantages of 529 plans to consider, as well. Be sure to talk with your financial advisor and tax professional for help assessing how a 529 plan may affect your tax situation.

1The earnings portion of nonqualified withdrawals is subject to federal income taxes, a 10% federal tax penalty and possible state taxes and penalties.
2If you die before the end of the five-year period, a prorated portion of the contribution will be considered part of your taxable estate.

Section 529 plans are established and maintained by state governments or agencies or eligible educational institutions. Contributions must be kept in a qualified trust in order to be treated as a qualified tuition program.

You should consider a 529 Plan’s fees and expenses such as administrative fees, enrollment fees, annual maintenance fees, sales charges, and underlying fund expenses, which will fluctuate depending on the 529 Plan invested in the investments chosen within the plan.

© 2010 Standard & Poor's Financial Communications. All rights reserved.

Contact a Representative Today

Back to Education Resources

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