Oregon College Savings Plan seminar will explain tax advantages to Eugene … – The Register-Guard
Parents, grandparents — and a smattering of aunts and uncles — will learn Saturday in Eugene how they can help any college-bound kid go the distance.
Officials from the state-sponsoredwill be on hand to explain how fattening a child’s college fund can win the giver a set of state and federal tax advantages.
The Oregon plan got a rocky start after its 2001 inception with big losses in some investment funds during the financial downturn and additional bumps in the road since then.
But, even in the worst years, saving in the Oregon plan was advantageous for many because of the cushion provided by state tax breaks.
And, sinceof New York City became the investment fund provider five years ago, Oregon families have seen solid returns.
“We’ve finally hit that spot where we have low fees and a quality investment product,” said Michael Parker, executive director of the. “It’s been a good few years here.”
Financial adviser Julia Carlson, whose Financial Freedom Wealth Management Group has offices in Eugene, said she’s impressed with the current plan, including fees that are 22 percent lower than the national average. “Now,” she said, “I feel really good about it.”
Investors, too, seem to be voting with their wallets. In 2014, the Oregon savings plan took in a record $162 million in new contributions, Parker said.
The 529 savings plan template was authorized by — and named after a section of — the Internal Revenue Service code. After Congress created the template in 1996, most states created plans that college savers can invest in.
Savers aren’t bound to their own state plan; they can seek better returns in another state’s 529 plan. But in states such as Oregon, which offers a significant tax break to residents who invest, families often are better off sticking with their home state plan.
In 2015, money stashed by an Oregon resident in the state’s college savings plan will allow deductions on taxable income of up to $4,600 for married donors and $2,300 for single donors.
Most plan investors pay Oregon income taxes of 9 percent, so placing money in the college savings plan is like an immediate 9 percent return on investment.
That’s hard for any other college savings plan to trump, Carlson said.
“It’s going to save you 9 percent of (about) $4,000, so $400,” Carlson said. “If a different state had a better plan investmentwise, you’d have to overcome 9 percent. No investment is going to be 9 percent better.”
Oregon plan investments — which go into an array of mutual funds — grow tax free, and they are ultimately spent tax free on qualified college expenses, such as tuition, books, room and board. When plan holders withdraw the money to make such payments, they have to certify to the 529 plan the reason for the withdrawal.
The 529 plan also allows savers to avoid federal gift tax limits (over five years) when front-loading a college savings account.
As of Sept. 30, the Oregon plan managed 78,000 college savings accounts with $1 billion in assets.
In early 2015, the Oregon College Savings Plan is enticing the parents, grandparents and assorted aunts and uncles to set up accounts for infants by offering a $25 matching contribution.
These “Baby Grad” accounts have to be launched before March 31 for a child younger than age 1.
Most participants plunk their savings into an age-based portfolio, which automatically moves from stock-heavy holdings when the recipient child is young to the supposedly safer bond funds when the child nears college age.
But in years when interest rates rise, such strategies can backfire. When interest rates rise — as some economists expect in the near future — the value of bond funds can drop.
In 2013, for instance, when the U.S. bond market as a whole dropped in value by 2 percent, Oregon investors with teenage recipients in age-based portfolios lost money. This came as a shock because many investors assume a bond fund is safe from loss.
In many cases, though, the families that lost on their investments still came out ahead because of the tax advantages.
Carlson recommends that Oregon plan savers build a custom portfolio of stocks, bonds and principle-protected funds. “I never use age-based portfolios,” she said.
For example, investors with students near college age can protect their funds in the Oregon plan’s Principle Plus Interest account, which protects principle and guarantees a 1 percent rate of return.
New this year, investors can rejigger their college plan holdings twice per year, compared with the limit of once per year since the 529 plan’s inception.
When children are young, parents will have to invest aggressively to keep ahead of tuition inflation, which has been at least 5 percent annually, according to the College Board.
Carlson figures that the cost of attending the University of Oregon today — tuition, fees and living expenses — is $25,000 a year.
“Baby Grad” parents who begin saving today are likely to need $57,300 a year for a UO education by the time their child reaches college age, according to the College Board savings calculator.
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Officials from the state-sponsored Oregon College Savings Plan will be in Eugene Saturday to explain the college savings tax advantage, how to invest in the Oregon savings plan — as well as general information on scholarships and financial aid
When and where: 4 p.m. Saturday at the Eugene Public Library, 100 W. 10th Ave.