The cost of higher education has increased exponentially over the years. In fact, a 2017 report by the Bipartisan Policy Center found tuition and fees have doubled since the year 2000. Additionally, college degrees are becoming the baseline to achieve a middle-class standard of living and a financially secure future.
The importance of attending college is clear. What’s not clear is how average American families can feasibly shoulder the costs of higher education. In today’s post, we explore one of the best tools to do just that - the Utah Educational Savings Plan (UESP).
What is the UESP?
The Utah Educational Savings Plan, commonly referred to as UESP, is a tax-advantaged 529 college savings plan established by the State of Utah and designed to encourage saving for future higher education costs. UESP is Utah’s official and only 529 college savings plan.
UESP accounts grow tax-deferred, meaning earnings accumulate without taxation on the federal and state level, allowing the account to grow at a faster rate. Additionally, withdrawals from the account are not taxed as long as the funds are used for higher education purposes; like: tuition, fees, books, supplies, equipment like computers, internet access, and educational software, and room-and-board expenses up to certain limits. UESP accounts can be used for vocational, undergraduate, and/or graduate schooling.
While the plan was specifically designed to benefit Utah residents, you do not have to be a Utah resident in order to open a UESP account and/or to be a beneficiary. Additionally, account owners can also be the beneficiaries themselves.
Account Types and Investment Options
Within the UESP program there are 14 investment options consisting of age-based options and static options. Additionally, if desired, you can create your own static or age-based portfolio within the customizable offerings. The various options are designed purposefully to help participants to create plans that work for all types of needs. Under UESP, account owners may change their account investment options twice a year.
Age-based options: Four age-based options are available in UESP. These plans automatically reallocate funds based on age. For example, equity funds might comprise the majority of the account while the beneficiary is elementary-aged. As the beneficiary reaches high school, the fund will automatically adjust the account to include more fixed-income, and thus less variable, funds.
Static Options: Eight static fund options allow participants to customize asset allocation themselves without automatically adjusting. The asset allocation stays the same in these accounts unless a change is requested.
Customization: There are two customizable options allowed within UESP accounts. These allow account owners to create a blend of age-based and static investments for their account. Consult your TrueNorth Wealth advisor on how to best utilize this plan strategy.
Besides being a tax-deferred savings account, allowing contributions to grow without taxation, UESP accounts offer owners certain tax credits. As of 2017, individual tax filers and corporations can claim a 5% tax credit up to $1,920 per qualified beneficiary and married couples filing jointly can receive up to $3,840 per beneficiary. There may be multiple accounts opened for the same beneficiary but each account must be invested in a different investment option i.e. age-based, static, or customized investment option. The maximum aggregate balance for each beneficiary is currently set at $430,000.
TrueNorth Wealth and UESP
As a firm, we pride ourselves on helping our clients reach their financial and personal goals through personalized financial planning. For many, having the means to send their children to college is one of those goals. UESP is a tool we recommend to all of our clients. In 2016, UESP was awarded the Morningstar Gold rating, the highest rating, signifying Morningstar analysts think highly of the plan.
TrueNorth Wealth CEO, Marty Watkins, has been involved with UESP for many years. Marty is one of many consultants that helps guide the decisions that makes UESP the gold-rated plan that it is. "I'm honored to be involved with UESP, they are a wonderful organization that offers academically sound investment options to help families saving for college education expenses," says Mr. Watkins.
For more information on the Utah Educational Savings Plan and to create a personalized financial plan, contact TrueNorth Wealth to schedule a free consultation today: 801-274-1820 or email firstname.lastname@example.org.
TrueNorth Wealth is a Fee Only® financial and wealth management firm specializing in personalized financial guidance to individuals and businesses. For a free financial consultation, please call TrueNorth Wealth: 801-274-1820 or email email@example.com.