Ep. 23 – (303) Series: Colorado 529 Plan – CollegeInvest – Interview with Brennan Hannon

Welcome to the Real Retirement Financial Planning Podcast. This series is for the (303) area code: our Colorado listeners.    


  Everything you wanted to know about the Colorado 529 Savings Plan (but didn’t know, or were too afraid to ask) Please join me with Brennan Hannon, Advisor Relations Manager at CollegeInvest, as we talk about all things Colorado 529, and 529s in general.  

  This was very fun, and Brennan was an amazing first guest. We’d talked about shooting this since January (originally doing a YouTube video), and he still pulled the trigger, and held his breath for our first episode as a guest on our podcast. If you are a CPA, or another advisor, call Brennan if you need any help with our Colorado 529 plan.   Conversation highlight(s): 
“It costs about half as much to save for college, then it does to borrow for college.” “All you need to open a Colorado 529 plan is a name, a social security number, and $15.” “About 70% of people expect a merit scholarship, and about 11% end up with one. When they do it’s about $6k on average.” “Athletic scholarships pay more, but only about 2% of all students end up with them.” “There are no student loans for retirement, if you don’t save, you’re in trouble.” “If you had an infant today, and you wanted to pay for all their college education…At a public in-state school you’d have to put away $650 a month….If a kid is 10, it goes up to a 1,000 per month.”  
Before we get rolling, three things: (1) Brennan and I tip-toe across things that could be interpreted as advice. We are only providing education. Advice is personal. Ask a qualified professional about your personal situation please don’t get yourself into trouble, and then blame us. Please. Thank you. Please. (2) I know we have out of state listeners. Though we are going to talk about the Colorado 529 plan, we also cover the basic structures of all 529 plans; be sure to research your own states plan with a professional before looking outside the state. (3) Also, I provide a teaser in the episode about free money, and then Brennan and I get so excited, I skip right over it. Let’s knock that out now: Grants: https://www.collegeinvest.org/matching-grant-program/ Please check this out! Dollar-Dollar matching up to $500 dollars!
  • You must be a Colorado resident.
  • Your Beneficiary (child, grandchild, etc.) must be 12 years old or younger at the time of the initial application.
  • You can get the grant for 5 years per child.
  • You must be able to claim the Beneficiary as a dependent for federal income tax purposes.
  • Your 2017 Family Adjusted Gross Income (AGI) from your tax return, as described in CollegeInvest Matching Grant Program TERMS & CONDITIONS, needs to be at or below the figures in the income eligibility chart below:

Scholarships: https://www.collegeinvest.org/collegeinvest-529-scholarship-colorado/   UPDATE, fees for the Direct Plan:

  What you’ll learn in this episode:
  • What’s a 529 plan: how’s it work; who can contribute; how much they can contribute; what are tax benefits, and who can own it [intro minutes and throughout the episode]
  • Specifics for Colorado: history, investment options; taxes, and cost [intro minutes and throughout the episode]
  • State tax deduction for Colorado residents, and how that works [18:45 – 19:40]
  • What you can and can’t use the money for? [19:57 – 29:20]
  • What qualifies as a institution, according to FASFA? [21:51 – 23:10; 27:00 – 29:20]
  • Can you use a 529 withdrawal to pay the rent for your family member if they live in your rental, and are enrolled in a qualified education institution? [24:15 – 26:52]
  • What to do with leftover balances if there is any. How to build an quasi-education trust through a 529. Can you keep the balance forever? [29:00 – 30:59; 32:30 – 33:39]
  • What if your child or grandchild gets a scholarship? [29:20 – 34:20]
  • What certain situations avoid the 10% non-qualified withdrawal penalty [29:90 – 34:20; 55:20 – 58:10]
  • What you can do if you get a windfall [34:20 – 37:30]
  • Can my kids blow the money? [37:05 – 37:30]
  • Other college savings alternatives people think about [37:30 – 43:54]
    • UTMA/UGMA
    • Real estate
    • Roth IRAs
    • Permanent life insurance
  • How contributions could affect future financial aid considerations, and strategies! [45:00 – 46:30; 50:07 – 55:20]
  • What qualifies as a family member, according to the IRS? [44:24 – 46:56]
  • How soon can you start saving for an unborn child? Start after daycare! [46:57 – 49:47]
  • ABLE accounts for children with disabilities? [57:04 – 59:23]
  • Update on the K-12 law change for using funds for private school [59:25 -1:05:04]
  • How you can benefit if your kids are going to college now (like today!) [1:05:05 – 1:08:59]
  • Company tax breaks with credits (even for a business of one, but, check with your CPA!)  [1:09:01 – 1:14:15]
  • Changes to the Direct (Vanguard choice) asset allocation [1:14:16 – 1:19:27]
  Show Notes: (1) Colorado 529 grants: https://www.collegeinvest.org/matching-grant-program/ (2) Colorado 529 scholarships: https://www.collegeinvest.org/collegeinvest-529-scholarship-colorado/ (3) Colorado 529 business tax credits:  https://www.collegeinvest.org/workingfamilies/ (4) Changes in asset allocation within the Direct Plan: http://www.dailycamera.com/boulder-business/ci_31740506/changes-afoot-college-savings-plans (5) Updates for the K-12 ruling: https://www.collegeinvest.org/register/ (6) Investment/savings options for Colorado 529: https://www.collegeinvest.org/529-savings-plans/ (7) ABLE accounts for children with disabilities: https://www.coloradoable.org/ (8) Active managers blowing up 529 plans: https://www.wsj.com/articles/SB101192982010000000?ns=prod/accounts-wsj (9) Who is a “qualified” family member, according to the IRS:  https://www.irs.gov/pub/irs-pdf/p970.pdf (10) What is a “qualified” institution, according to FASFA (search): https://fafsa.ed.gov/FAFSA/app/schoolSearch (11) 529 data sheet: http://www.collegesavings.org/wp-content/uploads/2015/09/0518_CSPN_EOY17_Embargoed.pdf (12) 529 state balances: http://www.collegesavings.org/wp-content/uploads/2015/09/December-2017-529-plan-data-5.14.18.pdf (13) States are in limbo with whether funds can be allowed for K-12 expenses: https://www.wsj.com/articles/states-worry-you-may-claim-529-tax-exemption-for-k-12-school-tuition-1518780605