Save Ottumwa Post November 20, 2024

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Many families and individuals who want effective and efficient ways to save for education expenses often turn to the everpopular 529 plan, which offers wideranging tax benefits. In recent years, the scope of 529 savings plan has expanded with several new features, many of which are often overlooked. If you anticipate that someone in your life may benefit from a 529, it’s important to understand the advantages – and common myths – of this unique savings vehicle.

Four common 529 plan misconceptions:

#1) A 529 is just for college. It is a common misunderstanding that 529 plans can only be used for higher education or college expenses. While the 529 plan was originally created to save for college costs, it has since expanded to be a broader savings vehicle. For example, 529 funds can now be used for qualified expenses for apprenticeship programs registered with the U.S. Department of Labor, educational loan payments (up to $10,000 total), and specific K-12 tuition (up to $10,000 per year).

The major value of a 529 plan is that any withdrawal from the fund that is designated as a qualified educational expense such as tuition and books is free from federal income taxes, and in some cases, state income tax.

#2) I must have children to open a 529. You do not have to have children to open a 529 for a beneficiary. Adults over the age of 18 can open a 529 plan for themselves or for another student, including a parent, grandparent, extended family or friend. You also can open a 529 plan for future children or grandchildren before they’re born, which is a tremendous advantage as it allows savers to take advantage of a long-time horizon for funds to grow. If you are anticipating a future student’s need for educational cost-assistance, you can start a 529 plan and name yourself the beneficiary and switch the account from yourself to the student at any point in the future. However, keep in mind there may be tax consequences if you change the beneficiary to someone outside of the original beneficiary’s family. Consider the relationship between any initial and intended beneficiary in advance of opening any plan. It is also important to note that the owner of the 529 plan must switch over the account to the appropriate beneficiary before withdrawals can take place.

#3) 529 plans rule out need-based financial

aid. Opening and utilizing a 529 can impact distributions of financial aid based on need, but it does not rule it out completely. A 529 owned by a parent or student is considered an asset under the Federal Application for Student Aid (FAFSA), which can reduce the ability to receive need-based financial aid, but only by a small percentage of the asset’s value. It is still possible to receive needbased financial aid if you have 529.

#4) I must use all the money in the account. You do not have to use all the funds in a 529 for education expenses. If you have funds remaining in your 529 plan – perhaps a child received a significant scholarship or a grandchild chose an alternative path over college – you may reallocate them. Starting in 2024, beneficiaries of a 529 plan that has been in place for more than 15 years can allocate the assets from the 529 account to a Roth IRA, which can be a great option to increase retirement savings in lieu of education expenditures. The lifetime maximum that can be transferred from a 529 plan to a Roth IRA is $35,000.

If transferring the funds to a Roth IRA does not make sense for your financial plan, you can utilize the money in a 529 for other expenses, but keep tax and penalty consequences in mind. For example, if the funds are used for expenses that are not designated as qualified education expenses, the

earnings portion of the withdrawal is subject to federal, and likely state, income tax as well as a 10% federal penalty. Make sure to consult a tax advisor for additional guidance.

A 529 plan can be a valuable saving tool if you have a desire to support the education of one or more loved ones in your life. Your financial advisor can help you understand if a 529 makes sense for your situation and how to plan for one of life’s biggest expenses while staying attuned to your long-term goals.

1 – Ameriprise Financial: “529 plans: frequently asked questions”. https://www.ameriprise.com/ financial-goals-priorities/educationplanning/529-plan-FAQ

Duane J Lusson, CFP, ChFC, CLU, MSFS, is a Private Wealth Advisor with Ameriprise Financial Services, Inc. in Ottumwa, Iowa. He specializes in fee-based financial planning and asset management strategies and has been in practice for 33 years. To contact him, call 641-684-4200 or stop by his office at 527 W. Second in Ottumwa, Iowa.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation. Ameriprise Financial cannot guarantee future financial results.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.

© 2024 Ameriprise Financial, Inc. All rights reserved. File # AMP6892200.1-

BARN RESTORATION

Ottumwa Post App

Reforestation

It is an ongoing job to maintain and improve the timber on the property. I attempt to get rid of the undesirable trees and replace them with trees that are more valuable. Undesirable trees include anything that has thorns on them such as Osage orange (hedge trees) and locusts. Since they both have hi R-values when they burn, I do not have much trouble getting someone else to cut them for me. I personally do not burn firewood, so I do not have to go to all the work of taking them out myself.

I replace or expand the timber areas with trees that will be of value sometime in the future. I re-plant oaks, walnuts, and hickory trees. It may be another fifty or sixty years before they are mature enough

to have commercial value, but wildlife will benefit from the acorns and nuts until then. A hardwood forest also provides habitat for deer, turkeys, squirrels, and a wide variety of birds.

Planting trees from nuts or acorns is quite easy. In the fall, when nuts mature and have fallen from the trees, a person can gather them up in a bucket. After a rain, when the ground is wet, I simply drop a nut on the ground where I want a new tree and stomp it into the soft dirt. Not all trees planted this way will survive but many of them will. Since it is a native plant and costs nothing to plant, deer and turkeys will, for the most part, leave them alone. I am happy if half of my plantings make it through the next year.

Specialized trees are an entirely different story. At times, I like to plant different trees for color or fruit. These trees require much more care and survival rates are much lower. Years ago, I purchased a hundred hard maple trees to expand the timber on the side hill across the lake. I thought they would be beautiful towering over

the hillside with colorful leaves reflecting in the water during the fall. I killed off the vegetation, dug a hundred tidy little holes, fertilized and planted my little maple trees. Most of them lived until fall when their leaves turned brilliant red and orange. During the winter, the deer came along and ate all but three of them. These three flourished until late the next fall when the deer ate them also. We now have no maple trees.

One day, I decided we needed a weeping willow tree down by the cabin. Other willow trees grew nearby so I thought it would do well.

The saying goes, make a hundred-dollar hole for a ten-dollar tree. I followed that wisdom and even followed the directions that came with it from the greenhouse. When I got it all planted, I pounded four steel posts around it

and tied the tree to them for supports. As a final precaution, I wrapped chicken wire around the outside of posts so deer could not reach it. It was doing great until that fall. Buck deer like to rub their antlers on trees to polish them and remove velvet. Apparently, they prefer store bought trees to any of the tens of thousands of trees that are located about the farm. One day when we went to the

cabin, we discovered chicken wire strung out across the lawn. A couple of the steel posts were bent over and the weeping willow street had been rubbed to the point where there was nothing left but a few shreds of bark. It must have been the best place in the world to rub their antlers because it had to be a lot of work to destroy our poor little tree. Just because a person’s reforestation project is going to benefit wildlife does not mean they are going to make it any easier.

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