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College Savings Program

Transcription of 529 Interview with Comptroller DiNapoli

Comptroller DiNapoli’s Introduction
Hi, I’m New York State Comptroller Tom DiNapoli.

Many New Yorkers are facing the challenge of paying for college. Fortunately, the New York 529 Plan is a great way to invest in your child’s future and save money on your State taxes.

Today, I will speak with George Makras from UPromise Investments to discuss New York’s 529 Plan and what it can do for you.

I also encourage you to regularly visit our Web site to identify other ways our State can help you save more of your hard-earned money.

Thomas DiNapoli
George, when I travel across New York State, I hear from so many families about the concern of affording college education for their children. One great way for New Yorker’s to save is with New York’s College Savings Plan, the 529 Direct Plan. Tell us about it.

George Makras
Well, 529 is just an account that families can set up to save money for college. The money from this investment grows tax-free and that’s what really makes the account so special. It’s the tax treatment.

Thomas DiNapoli
So in terms of the tax benefit. You get a tax deduction, you don’t pay taxes while the money is in there and the earnings come out tax free when it’s used for college costs.

George Makras
That’s right. It really is a great way to encourage families to start saving.

Thomas DiNapoli
George, one other question when we talk about tax benefits. Up to how much can you contribute in these accounts?

George Makras
There is a program maximum of $235,000, but families can put in $5,000 a year, ten if they file jointly, and deduct that from their New York State taxes. No matter how much they put in, that’s the maximum they can deduct.

Thomas DiNapoli (15.20)
So, that’s the limit then? OK

George Makras
That’s the limit.

Thomas DiNapoli
Upromise. That plays a roll in all of this, as well. Talk about that.

George Makras
Yes. Families can join the free Upromise Rewards Program and earn money every time they buy groceries, certain items at the drug store, eat out at a restaurant, book travel and much more. The money that accumulates in the Upromise Rewards account can be transferred to the 529 directly, subject to a $25.00 minimum, but parents should consider signing up.

Thomas DiNapoli
I see those signs all over the place, so there are many opportunities to take advantage of that. How easy is it for someone to open up an account?

George Makras
Very easy. It only takes about ten minutes and $25.00 to get started.

Thomas DiNapoli
That’s pretty easy and it’s not just for a parent of a child, right?

George Makras
That is correct. Grandparents, family members can set up an account. It’s a great way to start building that savings.

Thomas DiNapoli
Obviously, some of the kinds of questions that will go into this is, the age of the child at the time you’re opening up the account; the amount of income that you have, so those kind of life situations would determine how you would tailor the choices that meet your needs best.

George Makras
Correct, Vanguard is actually the company that manages the investments and they’ve made the process very easy by offering three age based options. What that means is that your money is invested based on the age of the child and changes as they get older and closer to college age. Sort of on auto pilot. It starts off more aggressive when they’re younger and as they get closer and closer to college age, it shifts to a more conservative portfolio. There is also 12 individual portfolios that someone can choose from to customize the investment, if they want to have a little bit more control over it, but always important to note that no matter which investment option you choose you could lose value, as well. So, it’s important to understand the investment options.

Thomas DiNapoli
George, could you define for our viewers, what is a qualified higher education expense?

George Makras
Sure Tom. Qualified higher education expenses will cover anything that you need for school. Tuition, certain room and board costs, books, fees and supplies. As long as the money is used for those qualified higher education expenses at schools in New York, and out, the money is going to be free of State and federal taxes.

Thomas DiNapoli
What if money is not used for college, George? What are the implications of that?

George Makras
If it’s not used for college, the withdrawal is considered a non-qualified withdrawal and it would be subject to a 10 percent federal penalty tax, plus federal taxes, and State and local taxes. But, if the withdrawal is actually used for those qualified higher education expenses, then again, it would be free of  federal, State and local taxes.

Thomas DiNapoli
Well, so there’s no more important investment than in higher education and New York’s college savings plan, the 529 Plan, really provides a great opportunity for families to plan for their future in a responsible and effective way. So, thank you for sharing this information and we’ll encourage all New Yorkers to check out our web site and to dial that number to get more information about the college savings plan.

George Makras
Thank you very much.

Thomas DiNapoli
Thanks, George, very much.


Disclaimer

If you or the beneficiary are residents or taxpayers of another state, before you invest consider whether your or the beneficiary's home state has a college savings plan with state tax or other benefits, that are available only for investment in that plan. You should consult your tax advisor.

New York's 529 College Savings Program Direct Plan is described in the current applicable Program Brochure and Tuition Savings Agreement. Accounts are opened by completing an Enrollment Form. Call 1-877-NYSAVESor visit www.nysaves.org to obtain a Program Brochure and Tuition Savings Agreement, which includes investment objectives, risks, charges, expenses and other information; read and consider them carefully before you invest. Vanguard Marketing Corporation, Distributor and Underwriter.

Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state and local taxes.

The Comptroller of the State of New York and the New York Higher Education Services Corporation are the Program Administrators and are responsible for implementing and administering the Direct Plan. Upromise Investments, Inc. and Upromise Investment Advisors, LLC serve as the Program Manager and has overall responsibility for the day-to-day operations, including effecting transactions and, in certain circumstances, assisting Vanguard Marketing Corporation, an affiliate of The Vanguard Group, Inc., with marketing and distribution of the Plan. The Vanguard Group, Inc. serves as Investment Manager for the Direct Plan and, in certain circumstances, assists Upromise Investments, Inc. with other administrative services. Vanguard Marketing Corporation markets and distributes the Direct Plan.

No guarantee: None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, nor Upromise insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio. The value of your account will vary based on market conditions and the performance of the investment options you select, and may be more or less than the amount you deposit.

New York's 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor Plan, which is sold exclusively through financial advisors and has different investment options and higher fees and expenses as well as financial advisor compensation.

Upromise is a service mark of Upromise, Inc.
© 2008 State of New York