Grandparents Legacy Plans

More Grandparents using 529 Plans to put their legacy in place

By James Norman

The current generation of Grandparents is not only living very active lifestyles in retirement, they are happily taking active roles in the lives of their Grandchildren. Whether it’s participating in activities together, or helping out in both financial and non-financial ways, Grandparents are highly engaged in the lives of their Grandchildren.

A survey sponsored by Legg Mason and its 529 Plan, in partnership with GRAND Magazine, found overwhelming evidence that Grandparents are very committed to being part of their Grandkids lives in many ways – including a growing desire to help pay for college. This increasing trend to “pitch in” coincides with an increased level of financial sophistication among Grandparents. As they age, the survey showed that Grandparents actually enjoy thinking about and tracking their finances and a growing majority are opting to do this in partnership with a financial professional in a more collaborative relationship.

Grandparents have an increasing awareness that 529s are a tax advantaged way to help them pay for their grandchildren’s college tuition. When their own children were going to college, only 10% used 529 Plans, instead relying on savings and investment accounts and drawing on cash as needed. Now, with over two-thirds of those with college-bound grandchildren saving or planning to save for their future education, the number of those using 529 Plans has jumped to 40 percent.

When asked what their motivation was for contributing, 47% said the most important reason was because their grandchildren need the assistance and they have the financial means to help out.  This reason was followed closely by 39% who said leaving some sort of legacy was the most important reason.

The Grandparents’ definitions of a legacy ranged from passing on family values (61% strongly agree); ensuring the Grandchildren value education (58% strongly agree); and for the Grandchildren to be more successful than they were (48% strongly agree).

A 529 Plan can be started with a very small initial investment. For example, with the Scholars Choice College Savings Plan you can open an account with as little as $250 with subsequent contributions at a minimum of $50. That makes it easy to add to the Plan each year for birthdays and holidays. The growth of your account can far outpace inflation and even CDs when invested in a top performing 529 Plan, and coupled with state and federal tax advantages it all adds up to a meaningful contribution by the time your grandchildren reachs college age. For example, if you contributed $1000 every year from the time the grandchild is born, the 529 account could total as much as $31,000 by the time they enter college¹ – enough to pay for a year of in-state public college or room and board or even books and supplies.

For more information on how to start a 529 Plan for your Grandchildren, go to: www.scholars-choice.com/grandparents

¹Assumption based on $1000 contribution per year with a hypothetical rate of return of 6% with investment made at birth until age 17.

James Norman is the President of QS Investors, the Legg Mason affiliate responsible for the investment management of Scholars Choice — an advisor-sold 529 plan. Legg Mason Global Distribution is responsible for the distribution and sales of the Scholars Choice 529 Plan.

Category: Grandkid News