New Law Boosts Tax-Free Savings

Date: February 15, 2015      Publication: Bottom Line Personal      Source:  Skip ­Fleming, CFP, Garrett Investment Advisors      Print:

A new federal law changes the tax code to provide greater flexibility for two different groups of people seeking tax-free savings. One of the changes allows investors in 529 college savings plans to shift allocations in each account twice per calendar year instead of once. The other creates a new type of plan, called a 529A, that allows individuals with severe long-term disabilities to invest money and withdraw it tax-free to pay for qualified expenses. Further details…

529 college savings plans: Under the old rules, investors might be nervous about shifting allocations early in the year because there might be a greater need to do so later in the year. Under the new rules, that’s less of a concern. Although rebalancing allocations just once might be enough, a second rebalancing might be wise if there are significant market shifts or if new investment options are introduced in your plan.

Caution: Don’t try to “time” the market. Trying to gauge when investments have hit highs or lows is very difficult even for experts.


529A disability savings plans: Qualified expenses under these plans include housing, transportation, health care and education. Only people whose disabilities begin before age 26 and are expected to prevent them from working for at least one year are eligible. The limit on contributions is $14,000 per year, and the overall limit on assets in a plan at any point is $100,000. Many plan details still need to be clarified.

Source: Skip ­Fleming, CFP, an investment adviser representative with Garrett Investment Advisors, Colorado Springs. He specializes in helping families that include people with disabilities.