We are very happy to bring you a feature that many of you have asked about- we now have 529 Plans in in the tool. Information about how to enter 529 Plans and how they are evaluated is listed below.
How do I enter a 529 / Educational Savings account into the tool?
goalgamiPro looks at both your current holdings and future contributions. Education Savings account- most commonly a 529 account- are no different, where there is adding an account and adding anticipated savings to the plan. You can add an account on the Household Summary page. This value would represent what you currently hold in your account. You may also add future contributions to the account under the ‘Anticipated Savings’ tab. Both are described in detail below.
Adding an Account
To add your current account, select the Household that you are working with and navigate to the Household Summary page. Here, you select ‘Add Account’ from the dropdown. Scroll down to select ‘529/Education’.
Figure 1: Household Summary, Select ‘529/Education’
Once you have selected ‘529 / Education’, you will be brought to a form to set up the account. You must select the Account Name and Principal. The principal can be the beneficiary, or it can be the parent contributing to the account. The account number, Financial Institution, and Comments are all optional.
Figure 2: Setting up a ‘529/Education’ Account
The account has now been set up. To complete the process, you simply need to add assets to the account. To do so, select ‘add’ next to the account that you have just set up.
Figure 3: 529/Education’ Account
On this page, you may enter in all the holdings. You can select securities or you can enter in Generic assets to represent an asset type. We use the value entered here as the account cost basis for tax purposes (if the account is used for non-education related goals).
Figure 4: Adding holdings to a ‘529/Education’ Account
Adding Anticipated Savings
For any planned future contributions to a 529 plan, you are going to want to enter a ‘Anticipated Savings’. This represents all your future contributions, and will be factored into all calculations accordingly.
To enter, navigate to the ‘Plan Resources’ tab within the Plan. On this tab, there is a section called Anticipated Savings. Select the drop-down titled ‘Add Anticipated Savings’, and select ‘Education’.
Figure 5: Adding future education contributions
This brings you to “Anticipated Savings: Education”, which is where you enter in the planned contributions to the education savings. Here you must name the contribution and link it to your 529 account. You also need to specify the frequency and duration of your contribution. Finally you must state the value that you will be contributing each period. In the example below, we are contributing $300/month to College Savings for Samantha. This is linked to the ‘Daughter’s College Savings’, and goes 02/2014 – 02/2024. You do have the option, like any other savings, to adjust for Inflation or other additional annual adjustments.
Figure 6: Add future education contributions
Once you have saved, the ‘Anticipated Savings’ has been added and is now visible on the ‘Plan Resources’ tab as well as the Balance Sheet and Cash Flow Analytics.
How are 529 Plan evaluated in the Balance Sheet?
529 Plans have two aspects to analyze in the Balance Sheet- the current value of the account, and any future contributions that you plan to make to the plan. Both are relevant to the balance sheet calculation, and are calculated different.
Current Account- This is the value that you entered in the Household Summary section of the tool. Our calculation assumes that you will be using the investment for its intended purpose- education. Therefore, there is no tax implication assumed. Your value entered on the Household Summary section is unchanged.
Anticipated Savings- This is the value that you entered on the ‘Plan Resources’ tab within the plan. Again, our calculation assumes that you will be using the investment for education, so there is no tax implication. We do, however, discount future contributions to assume the Net Present Value of these future cash flows. You can read more in Net Present Value.
How are 529 accounts evaluated in the Cash Flow Planner?
The Cash Flow Planner analyzes both aspects of the 529 Account: the current value of the account, which was entered in the Household Summary, and any anticipated savings, which was entered in Plan Resources. Any Anticipated Savings are contributed directly to a 529 Account, so the account growth and tax implications are consistent whether the entry is in the present or the future. 529 plans are grouped together in the Cash Flow Planner, rather than being treated separately. This is done to optimize the accounts and for ease of use. Essentially, if you have excess cash in one 529 Plan after paying for an education goal, you can use that money for another education plan if it is for a member of the family. We did not want to put the burden on you to always determine what is done with the excess cash in every individual account, so grouping the accounts together makes things easy while accurately reflecting what would happen in a families 529 account.
Taxes and penalties are only assessed on a 529 account when the account is used to pay for a non-education goal. The Cash Flow Planner is an optimized solution, so it will make sure that this cash is not used unless absolutely necessary. For instance, if your education goal does not exist until sometime in the future, the system takes into account that any earlier withdrawals unrelated to education would come with a penalty, so it will use other resources- if available- to pay for these other goals.