MoneyWise | January 14, 2020


Show Notes

When you’re paying for college, the 529 education savings plan is tough to beat—your money grows tax-deferred and you withdraw it tax-free for qualified expenses.  But did you know there’s a similar plan for the disabled?  It’s called the 529-ABLE or 529-A savings plan.  It can be a huge help for families caring for a member with special needs. Financial planner and teacher Rob West fills us in on how to make the most of a 529-A savings account.  

  • The original 529 plan has proved so successful helping families pay for education expenses that Congress extended the concept to people with a disabled member, families who often have to deal with huge expenses. 
  • Contributions are not tax-deductible but they are allowed to grow tax-deferred.
  • Contributions to a 529-A account are made with after-tax dollars and are limited to $15,000 a year (in 2019). Earnings on those funds are tax-deferred and distributions are tax free for qualified expenses.
  • The beneficiary must meet the Social Security Administration’s definition of “disabled.”
  • There’s an age limit for setting up a 529-A plan—26 years old. The beneficiary must be diagnosed with a qualifying disability before then.
  • Unlike the education savings version, there can only be one 529-A savings account per beneficiary and all qualified spending must be within the beneficiary’s state of residence.
  • The beneficiary is still eligible for federal and state aid for the disabled.
  • Congress has authorized states to set up 529-A plans. So far most states have done it but there are still about 10 “hold outs,” so you have to check if your state has a plan.

On this show we also answer your questions:

  • If you're 68 and have inherited an IRA from your mother, what are your obligations for annual distributions?
  • What are the pros and cons between a variable annuity and an index (fixed) annuity?
  • Can you roll your annuity over into a CD or an IRA?
  • If you have a frozen pension, can you roll this over into your 401(k)?
  • If you have minted coins just sitting around, what should you do with them?

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