- By Rick Prybyl
- Business & Technology
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A New York State 529 College Savings Plan provides for state tax deductible contributions of up to $10,000 per couple each year. Lump sums can be invested in the plan as well though the state tax deduction only applied to the first $10,000. Often, grandparents and parents make large lump sum contributions of up to a 529 plan. The maximum contribution to a New York State sponsored 529 plan is $235,000. This is sometimes done as part of an estate plan. Once invested, the accounts grow free of federal and state taxes.
When used for college tuition, room and board, and qualified supplies, the proceeds can be withdrawn tax free as well. At present there are two New York State specific plans: Columbia and Vanguard. In 2004, New York State opted not to renew the contract with the prior provider, TIAA/CREF. Proceeds of the preexisting TIAA/CREF plans were automatically transferred to Vanguard unless the plan participant requested otherwise. As a point of note, Vanguard does not have a local 529 representation.The New York State 529 Plans provide for a variety of investments. Rick Prybyl of the local Merrill Lynch office stated that investments in the Columbia plan can be tailored into three categories. The first is an Age-Weighted plan whereby investments get increasingly more conservative as the child approaches their 18th birthday.
The second option includes Asset Allocation funds that diversify 529 plan investments across a range of stocks, bonds and cash. The concept of investing in this fashion is to provide more consistent returns over time. Third, Columbia allows investors to pick from a menu of specific funds including many stock and bond funds. This approach allows an investor to be more aggressive if they wish though the investor may face greater risk if the market which the investment is in should go through a period of decline.
Rich Farr discussed when one might use the Columbia Plan vs. the Vanguard Plan. Essentially, if parents or grandparents would like a trained financial advisor to ask as a sounding board in constructing their investments, then the Columbia plan provides for registered financial advisors to help create and invest in the plan. If individuals would rather deal directly with a plan that does not include a registered financial advisor, then they can choose either the Columbia or Vanguard plans and contact them directly.
There are several registered advisors in the Ithaca and Lansing area that provide the Columbia Advisor Plan. New York State Sponsored 529 College Savings Plan advisors can be reached at several local financial firms including Merrill Lynch at 277-6600.
| The Lansing PTSO does not endorse either of the above mentioned plans or specific financial advisors and considers the presentation as a public service for its educational and informational content. Rick Prybyl is Wealth management Advisor and Senior Resident Director of the Prybly Farr Group at Merrill Lynch in Ithaca. |
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