Learn how one advisor supports military families with their college savings plans
my529 spoke with advisor Christopher Flis about how he uses 529 plans in his practice. Flis, a CFP, is the president of Resilient Asset Management in Memphis, Tennessee. He specializes in serving senior military members and those nearing active duty retirement.
What do you see as the benefits of 529 plans?
529 plans are the premier, low-cost vehicle for college savings. [Earnings] that are saved in these plans grow tax-free if they are used to pay for qualified education expenses. There is a tremendous degree of flexibility in using the funds. A 529 plan can also be a very powerful estate planning tool. In short, the benefits significantly outweigh the drawbacks.
What do you see as the biggest benefit to a military family in using a 529 plan?
Paying for college is a serious challenge for most families, and military families are no exception. While the Post-9/11 GI Bill, which pays for a percentage of tuition, fees, housing, books and supplies based on period of active duty served, is an outstanding benefit, not ALL expenses are covered. For families with multiple children, additional funds to help cover education expenses is probably needed. 529 plans are a resource to save for those funding gaps.
What do you look for in 529 plans?
For starters, I look to see if my client’s state of residency offers a state income tax deduction for 529 contributions. If so, then we look at their state’s plan and assess the details of that plan. If the plan is otherwise acceptable, we use the plan for my client’s state of residency.
If the state does not offer a suitable plan, I work with my clients to use the my529 plan. I use my529 because
- Advisors can manage the assets on the platform.
- Portfolios are easily customized.
- Digital onboarding is available.
- Very manageable costs.
- Clients can easily access the portal for managing their account.
- my529 is consistently among the highest-rated in the country.
How often do you recommend 529 savings plans in your practice?
When my clients intend to pay college tuition for their children, I encourage them to consider using a 529 plan 100% of the time. There are presently about 20% of my clients who are participating in 529 plans.
How can a 529 plan best serve a child of a service member? Is it different if that child wants to join the military as well?
Since the decision to attend college is typically made well into a child’s teenage years, saving for college usually begins long before that. Ideally, starting a child’s college savings starts very early as the savings window is short, and so too is the “growth window.” If the child decides to join the military and the funds are not needed, all is definitely not lost—funds can be transferred to a sibling, become a legacy asset (family money that is handed down), or simply be withdrawn (see the Program Description for information regarding nonqualified withdrawals).
In short, the myriad options a parent has with 529 plans makes them an ideal accumulation vehicle.
What obstacles do your military clients express when discussing educational savings? How would a 529 plan help with those obstacles?
The primary obstacle for ALL parents—military included—is the tremendous expense of paying for a college education. For parents whose frame of reference for cost is still their own college education expenses, the cost of today’s college education can be truly shocking. For ALL parents, I recommend that they mentally prepare for and plan for a $30,000 bill per year. If it ends up costing less, great, but if it ends up being more, at least your expectations have been adjusted accordingly. Having a 529 account offers some real advantages for parents, and, at the end of the day, there are very few drawbacks.
What alternatives do you consider when saving for college? How do 529s fit into that? Or do they?
Paying for college is an “all-hands-on-deck” effort. At my firm, we utilize all of the following:
- Post-9/11 GI bill (for those who qualify).
- Yellow Ribbon Program advice.
- Use of UTMA (Uniform Transfers to Minors Act) funds for optimizing capital gains tax opportunities.
- Taking advantage of the American Opportunity Tax Credit.
- Integrating the funding philosophies of parents into funding college educations for their children.
- 529s definitely play a part for ANY college funding.
When you talk about the UTMA funds, can you explain what those are and how they optimize capital gains tax opportunities?
Using capital gains gets into some relatively complicated tax advice, and you should consult a tax preparer. However, for the child’s second year of college, they can usually file “Individual” and NOT be claimed as a dependent on their parents’ tax return.
As long as $4,000 of college expenses are paid “out of pocket,” the child could take advantage of the American Opportunity Tax Credit, which is a $2,500 credit available for the first four years of college.
By transferring appreciated stock to the child via an UTMA, or as an outright gift, the child could sell the stock and use the American Opportunity Tax Credit to offset the capital gains.
Then, the parents could replace the transferred asset with the cash they would have used to pay the college tuition bill.
Like I said, it is complicated, though there is a real benefit there to the parents as they can avoid significant amounts of capital gains taxes on appreciated assets.
What do you mean by integrating the funding philosophies of parents into funding college educations for their children? Can you elaborate about this?
I always ask parents what they are trying to achieve by funding their child(ren)’s college education. Some want to do the same thing for all their children, some want to reward individual achievement among their children, others don’t want their children burdened with student loan debt.
There is a lot to unpack there. I generally lay out all the tools at the parents’ disposal and then we hash out how they want to attack the college funding problem.
Have you seen the benefits of 529s play a part in more than just funding college tuition?
Yes—absolutely. 529 funds can now be used for K-12 education, up to certain limits. Life happens, and sometimes people need funds due to unforeseen circumstances—death, divorce, job loss, a pandemic, pick your favorite unpleasant event.
In those cases, 529 funds can come in very handy, especially if a parent wants to maintain their child’s academic arc.
For more information regarding the Post-9/11 GI Bill or Yellow Ribbon Program, please visit the following link: https://www.va.gov/education/about-gi-bill-benefits/post-9-11/
About Christopher Flis
After a 20-year Navy career, Chris retired in March 2016. However, retiring from the military didn’t mean Chris wanted to stop working, so he founded Resilient Asset Management, a Tennessee Domiciled financial planning firm. This allowed him to realize one of his greatest passions in his work: helping people achieve financial security through all aspects of financial planning and investment management.
Chris is Resilient Asset Management’s president. As a professional financial planner, he specializes in serving senior military members and those nearing active duty retirement. Resilient Asset Management focuses on estate planning, insurance and risk management assessment, income tax planning, cash flow analysis, investment management, and more.
Chris lives in downtown Memphis with his wife, Christine, and his son Emerson. He is an avid runner, and when he is not jogging for exercise, he is usually chasing his son around or walking his three dogs.