A Different Degree of Wealth

529 Plans: The Ins and Outs of Contribution Withdrawals

529 plans can be powerful college savings tools, but you need to understand how your plan works before you can take full advantage of it. Among other things, this means becoming familiar with the finer points of contributions and withdrawals.

How much can you contribute?
To qualify as a 529 plan under federal rules, a state program must not accept contributions in excess of the anticipated cost of a beneficiary’s qualified education expenses. At one time, this meant five years of tuition, fees, and room and board at the costliest college under the plan, pursuant to the federal government’s “safe harbor” guideline. Now, however, states are interpreting this guideline more broadly, revising their limits to reflect the cost of attending the most expensive schools in the country and including the cost of graduate school. As a result, most states have contribution limits of $350,000 and up (and most states will raise their limits each year to keep up with rising college costs).

A state’s limit will apply to either kind of 529 plan: savings plan or prepaid tuition plan. For a prepaid tuition plan, the state’s limit is a limit on the total contributions. For example, if the state’s limit is $300,000, you can’t contribute more than $300,000. On the other hand, a savings plan limits the value of the account for a beneficiary. When the value of the account (including contributions and investment earnings) reaches the state’s limit, no more contributions will be accepted. For example, if the state’s limit is $400,000 and you contribute $325,000 and the account has $75,000 of earnings, you won’t be able to contribute any more — the total value of the account has reached the $400,000 limit.

These limits are per beneficiary, so if two people each open an account for the same beneficiary with the same plan, the combined contributions can’t exceed the plan limit. If you have accounts in more than one state, ask each plan’s administrator if contributions to other plans count against the state’s maximum. Generally, contribution limits don’t cross state lines. In other words, contributions made to one state’s 529 plan don’t count toward the lifetime contribution limit in another state. But check the rules of each state’s plan.

How little can you start off with?
Some plans have minimum contribution requirements. This could mean one or more of the following: (1) you have to make a minimum opening deposit when you open your account, (2) each of your contributions has to be at least a certain amount, or (3) you have to contribute at least a certain amount every year. But some plans may waive or lower their minimums (e.g., the opening deposit) if you set up your account for automatic payroll deductions or bank-account debits. Some will also waive fees if you set up such an arrangement. (A growing number of companies are letting their employees contribute to savings plans via payroll deduction.) Like contribution limits, minimums vary by plan, so be sure to ask your plan administrator.

Know your other contribution rules
Here are a few other basic rules that apply to most 529 plans:

  • Only cash contributions are accepted (e.g., checks, money orders, credit card payments). You can’t contribute stocks, bonds, mutual funds, and the like. If you have money tied up in such assets and would like to invest that money in a 529 plan, you must liquidate the assets first.
  • Contributions may be made by virtually anyone (e.g., your parents, siblings, friends). Just because you’re the account owner doesn’t mean you’re the only one who’s allowed to contribute to the account.
  • 529 savings plans typically offer several different investment portfolios that you can pick from to invest your contributions. If you want to change your investment option, you can generally do so twice per calendar year for your existing contributions, anytime for your future contributions, or anytime you change the beneficiary of the account.
  • 529 account owners who are interested in making K-12 contributions or withdrawals should understand their state’s rules regarding how K-12 funds will be treated for tax purposes. Some states may not follow the federal tax treatment. In addition, account owners should check with the 529 plan administrator to determine whether a K-12 withdrawal request should be made payable to the account owner, the beneficiary, or the K-12 institution.

Maximizing your contributions
Although 529 plans are tax-advantaged vehicles, there’s really no way to time your contributions to minimize federal taxes. (If your state offers a generous income tax deduction for contributing to its plan, however, consider contributing as much as possible in your high-income years.) But there may be simple strategies you can use to get the most out of your contributions.

For example, investing up to your plan’s annual limit every year may help maximize total contributions. Also, a contribution of $15,000 a year or less in 2021 qualifies for the annual federal gift tax exclusion. And under special rules unique to 529 plans, you can gift a lump sum of up to five times the annual gift tax exclusion — $75,000 for individual gifts or $150,000 for joint gifts — and avoid federal gift tax, provided you make an election on your tax return to spread the gift evenly over five years. This is a valuable strategy if you wish to remove assets from your taxable estate.

Lump-sum vs. periodic contributions
A common question is whether to fund a 529 plan gradually over time, or with a lump sum. The lump sum would seem to be better because 529 plan earnings grow tax deferred — so the sooner you put money in, the sooner you can start to potentially generate earnings. Investing a lump sum may also save you fees over the long run. But the lump sum may have unwanted gift tax consequences, and your opportunities to change your investment portfolio are limited. Gradual investing may let you easily direct future contributions to other portfolios in the plan. And realistically, many parents may not be able to fund their account with a lump sum, but they may be able to easily make monthly investments.

Qualified withdrawals are tax free
Withdrawals from a 529 plan that are used to pay qualified education expenses are completely free from federal income tax and may also be exempt from state income tax. For 529 savings plans, qualified education expenses include the full cost of tuition, fees, books, equipment, and room and board (assuming the student is attending at least half-time) at any college or graduate school in the United States or abroad that is accredited by the Department of Education; the cost of certified apprenticeship programs (fees, books, supplies, equipment); student loan repayment (there is a $10,000 lifetime limit per 529 plan beneficiary and $10,000 per each of the beneficiary’s siblings); and K-12 tuition expenses up to $10,000 per year.

Note: A 529 plan must have a way to make sure that a withdrawal is really used for qualified education expenses. Many plans require that the college be paid directly for education expenses; others will prepay or reimburse the beneficiary for such expenses (receipts or other proof may be required).

Beware of nonqualified withdrawals
A nonqualified withdrawal is any withdrawal that’s not used for qualified education expenses. For example, if you take money from your account for medical bills or other necessary expenses, you’re making a nonqualified withdrawal. The earnings portion of any nonqualified withdrawal is subject to federal income tax and a 10% federal penalty (and may also be subject to a state penalty and income tax).

Is timing withdrawals important?
As account owner, you can decide when to withdraw funds from your 529 plan and how much to take out — and there are ways to time your withdrawals for maximum advantage. It’s important to coordinate your withdrawals with the education tax credits (American Opportunity credit and Lifetime Learning credit). That’s because the tuition expenses that are used to qualify for a credit can’t be the same tuition expenses paid with tax-free 529 funds. A tax professional can help you sort this out to ensure that you get the best overall results. It’s also a good idea to wait as long as possible to withdraw from the plan. The longer the money stays in the plan, the more time it has to grow tax deferred.

Note: Before investing in a 529 plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses, which contain this and other information about the investment options, underlying investments, and investment company, can be obtained by contacting your financial professional. You should read these materials carefully before investing. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated. Investment earnings accumulate on a tax-deferred basis, and withdrawals are tax-free as long as they are used for qualified education expenses. For withdrawals not used for qualified education expenses, earnings may be subject to taxation as ordinary income and possibly a 10% federal income tax penalty. The tax implications of a 529 plan should be discussed with your legal and/or tax professionals because they can vary significantly from state to state. Also be aware that most states offer their own 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers. These other state benefits may include financial aid, scholarship funds, and protection from creditors.

Have a fantastic weekend!

Source: Broadridge

Golf Tip of the Week

Be a Better Lag Putter and Control Your Distance

In golf, your instincts can get you into trouble. A good example is when you have a long putt. The tendency is to think you have to hit the ball harder than normal. That mind-set leads to a short backstroke and a fast flick on the downstroke. The result is usually poor contact—and a putt that never gets to the hole.

A better technique is to lengthen your backstroke but keep the pace of the motion the same. That produces more energy at impact—the longer stroke gives you smooth acceleration—and a better chance of catching the ball flush. It’s just like trying to get more distance on a full shot: Hitting the ball in the middle of the clubface is the best thing you can do to transfer energy into the ball. And the best way to lose energy? You guessed it—make a wild swing and mis-hit the shot.

To become a good lag putter, you might have to reconsider the way you think about the stroke. If you believe you should lock your arms and hands and simply rock your shoulders, you’re going to struggle from long distance. Lag putts require some play in the elbows and wrists. I’m not saying you should purposely hinge them, but you should let them react naturally to the motion. Lock those joints, and you can only make so much swing.

So, get into your setup with a nice light grip, and maintain that pressure throughout the stroke. That will let you keep some softness in your hands and arms for a longer motion that has more momentum—and more power. Your lead wrist will naturally have a little cup or backward bend in it at address. Feel like that wrist flattens on the backstroke, and then the trail wrist flattens through impact. That’s how you create speed without forcing it.

Tip adapted from golfworldtoday.comi

Recipe of the Week

Chocolate Covered Salted Caramels

32 Caramels 


  • 1 cup granulated sugar
  • 1/2 cup light brown sugar
  • 1/2 cup light corn syrup
  • 1 1/2 cups of heavy whipping cream
  • 1/2 cup salted butter (room temperature)
  • 1/2 teaspoon salt
  • 1 teaspoon pure vanilla extract
  • 8 ounces of semisweet chocolate, chopped or use chocolate chips
  • Coarse salt for topping candies


  1. In a medium heavy-bottom saucepan, combine granulated sugar, light brown sugar, corn syrup, heavy cream, salt, and salted butter.
  2. Over medium heat, stir all the ingredients until the butter has melted.
  3. Insert your candy thermometer and let the caramel cook. You will want to stir every couple of minutes to ensure the caramel doesn’t burn during the cooking processes.
  4. At the same time, you are waiting for your candy, which can take anywhere from 20-35 minutes, prep your pan. I found that a pan with the dimensions of somewhere around 8×6 inches was perfect. I have a 6-cup glass storage container that gives me the exact height I’m looking for in my candies, around 1/2 inch thick. If you want a thinner caramel, an 8×8 will work great. Line your pan with parchment paper to make removal easier.
  5. When I used my digital candy thermometer, 244 F degrees was the magic number the caramel should cook to.
  6. As soon as the caramel reaches 244 F degrees, immediately removed the saucepan from the heat and add vanilla extract, stirring quickly. Pour the caramel into your prepared dish and give a couple of taps to remove any air bubbles. Let the caramels cure at room temperature for at least 2 hours undisturbed.
  7. When completely dried, remove the caramels from the pan and cut them into your desired size and shape. If the mixture seems too sticky, where the caramel is tearing instead of cutting, put back into the pan to let dry a little longer, or pop into the fridge to help firm up.
  8. Once you have all your caramels cut, place them in the fridge to chill before their chocolate bath. Melt your chocolate slowly in the microwave in short bursts, stirring often, or over a double broiler. I prefer a double boiler because once you remove it from the stove, the hot water keeps the chocolate at the perfect dipping temperature.
  9. Drop the caramels in the melted chocolate one at a time, coating entirely. Use a fork to lift out the caramel and tap off the extra chocolate.
  10. Slide the Chocolate Covered Salted Caramel to a parchment paper-lined baking sheet or a silicone mat. After you do a couple of caramels, sprinkle with coarse salt.
  11. Let these Chocolate Covered Salted Caramels dry before storing them in an airtight container.

Recipe adapted from the honeybee.comii

Health Tip of the Week

How to Have a Happy, Healthy Summer, Part 2

Eat Right and Stay Healthy
Summer is the perfect time to enjoy an outdoor meal with friends and family. Refreshing salads, melons, and berries add color and flavor to picnics and cookouts. But because warmer temperatures can easily spoil food, you’ll need to be extra careful.

  • Wash hands, utensils, containers, and work surfaces before handling food to prevent harmful bacteria from spreading.
  • Cook food the same day as the picnic, not in advance, to give bacteria less time to grow.
  • Wash fruit and vegetables before cutting in case bacteria are present on the rind or peel.
  • Keep mayonnaise-based foods and other cold foods in an insulated cooler with plenty of ice or frozen gel packs.
  • Throw out leftovers that have been sitting out for more than 2 hours, or 1 hour if the temperature is over 90°F.

And if you’re cooking out, follow these tips for safe, healthy grilling:

  • Serve more chicken, fish, and vegetables, and cut back on ground beef, pork, sausage, and hot dogs.
  • Defrost and marinate foods in the refrigerator, and don’t reuse marinade that touched raw meat or poultry unless you boil it first. 
  • Bring one set of plates and utensils for handling raw foods and another for cooked foods to prevent cross-contamination.
  • Bring a food thermometer to be sure grilled foods are cooked enough. Hamburgers should be cooked to at least 160°F and chicken breasts to 165°F.
  • Cooking meat at high temperatures creates chemicals that may raise your cancer risk. Reduce the risk by cleaning charred bits from your grill before cooking and from your food before eating. Line the grill with foil poked with holes. The fat will drip off, but the smoke won’t reach the meat.

Tip adapted from cancer.orgiii 

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Securities through Triad Advisors, LLC, Member FINRA / SIPC . Advisory services through Ballentine Capital Advisors, Inc. Triad Advisors, LLC and Ballentine Capital Advisors are not affiliated entities. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

The articles and opinions expressed in this newsletter were gathered from a variety of sources but are reviewed by Ballentine Capital Advisors prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices.

Securities through Triad Advisors, LLC, Member FINRA/SIPC. Advisory services through Ballentine Capital Advisors, Inc. Triad Advisors and Ballentine Capital Advisors are not affiliated entities.


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