Why you need an adult 529 account.
May 29th is usually the day it feels like I’m being specially targeted with articles and social media posts about 529 savings plans and I don’t even have children. For those unfamiliar with it, 529 accounts are meant to help parents plan for future college costs. Although the name suggests that they are savings accounts, 529 plans are actually investment accounts, similar to retirement instruments such 401(k)s, with advantages and protections under the tax law and penalties for early withdrawal. Unlike retirement accounts, most 529 plans are sponsored by state governments and in some cases higher education institutions. There is also an option in some states to pre-purchase college credits rather than using the projected gains on the accounts to pay for college in the future.
As someone who is constantly assessing several scenarios at once (sometimes to my detriment), I wondered what way my debt would be set up {Kevin Heart voice} had my parents paid for my education before I even decided to go to school. I caught myself feeling hopeless as I tried to figure when I’ll be done paying my student loans when I reminded myself of a mantra I learned recently in a leadership course: Since we can’t go back in time, we have 100% of life left. What are you going to do with it? Deep, I know. The point is that only the time we have left is the time we can do something about. Thinking that way I decided that I will create my own 529 savings account for professional development.
The point of the real 529 accounts is that parents can start saving to help their kids finance career training in the future. Because our country and the tax code are not up-to-date with best practices in career readiness (a topic for another post, promise) these funds can only be used for college. However, even after college, most of us will need further training to advance in our careers. Since student loans just got more expensive and a lot of people don’t even qualify for aid if they already have a full-time job, it is on us to have a financial for when we need to upgrade our skills to keep up with industry changes, move into leadership roles and even pursue a career change.
I quickly came up with 13 reasons why I couldn’t afford to save any more money. Ok, it was actually only one reason: between retirement, emergency funds, my travel fund, saving for a downpayment and just regular recurring expenses my net income is, well zero. I planned it that way, allocating all disposable income to some sort of savings account or investment. As a good millennial, I took my frustration to Twitter and ‘told’ my state’s Department of Labor to allow young professionals to write-off training costs or set aside pre-tax dollars to re-train or up-skill in their fields. As I wait for my arduous advocacy efforts to show results, I figured I should have another plan.
I’ve decided to decrease my downpayment savings by $50 a paycheck and put it towards my soon to be created adult 529 savings account. I figured mortgages are also getting more expensive so maybe it’ll be smart (or actually dumb, not sure yet) to wait a little longer before buying a home. With that change I’ll have $100 a month to spend on professional development. This could be used for anything from networking events, to online courses to books on topics that are directly related to my field of work. I’ll treat the account just like a 529 and use it only for skill-developing expenses. Each year on May 29th I’ll recap how that investment impacted my career and re-assess the how much to set aside for the following year given the results.
The key here is to be disciplined and smart, always maximizing anything you can get for free or that you can get someone else to pay for (i.e. your employer when possible) but knowing that sometimes, as we wait for the state to listen to me, we’re just going to have to pick that tab. Yes, another one {DJ Khaled voice}.
