529 plans aren’t just for parents, anyone can contribute. Image: Andrey_Popov/Shutterstock.com
By: John GrobeThere are two “days” in May that deal with financial issues that should be important to us.
First is May 2nd, which is National Life Insurance Day. Life insurance proceeds are an important source of income for those we leave behind, especially if we die earlier than expected. We generally need less life insurance as we age – called the “theory of decreasing responsibility” by life insurance professionals.
If it’s been a while since you’ve checked your life insurance, do it this May. Look at both the level of coverage (is it enough/too much?) and the cost. If you have Federal Employees Group Life Insurance (FEGLI), make sure you know how it works and how it changes once you retire.
May 29th is 529 Day. A 529 plan is a state sponsored education savings plan. While used most often for college expenses, money saved in a 529 can also be used for secondary education expenses. And the plans aren’t limited to covering tuition and fees; they can also be used for books, supplies, room, and board. We used 529 funds to get a new computer for our granddaughter to use in college. Yes, 529 plans aren’t just for parents, anyone can contribute. In fact, I contributed to my grandniece’s 529 when I lost a bet (darn those Illini) with my nephew; had I won, he would have contributed to my granddaughters’ 529s.
529 plans allow you to invest in state approved investments (generally index-type mutual funds), or in a pre-paid tuition plan. Every state has a 529 plan and most of them offer a break in state income tax for 529 contributions. A website, www.savingforcollege.com, lets you compare state plans.
Here’s a bit of May trivia. The distress call “MayDay” comes from the French “M’aidez”, or “help me”. It was adopted about 100 years ago when voice, rather than telegraphic, communication was growing in use. Here’s a quote from the London Times in February of 1923 (taken from Merriam-Webster’s® word history).
“Owing to the difficulty of distinguishing the letter “S” by telephone, the international distress signal “SOS” will give place to the words “May-day”, the phonetic equivalent of M”aidez, the French for “Help me.”
MayDay is not a word you want to be using when talking about your retirement finances. Take the time to learn how your FERS annuity, Social Security, and the Thrift Savings Plan work. And, maximize your TSP contributions – save early and save often.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
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