A wide array of U.S. federal agencies are descending on the Hawaiian island of Maui as relief begins pouring in following a devastating set of wildfires that completely destroyed the popular coastal town of Lahaina, displaced thousands of local residents and killed at least 111 people, according to the most recent information.
The Department of Housing and Urban Development (HUD) has instituted a 90-day moratorium on foreclosures of mortgages insured by the Federal Housing Administration (FHA), as well as a pause on foreclosures of mortgages in the Indian Home Loan Guarantee program.
Borrowers at or over the age of 62 who are engaged in a Home Equity Conversion Mortgage (HECM) have also been given a 90-day extension. All relief measures are effective as of the official disaster declaration issued by President Joe Biden on August 10.
HUD also detailed the availability of additional housing assistance for individuals upon request, including FHA insurance to disaster victims; HUD’s Section 203(k) loan program that allows the finance of a purchase or refinance of a house along with its repair through a single mortgage; flexibility to Community Planning and Development grantees, Public Housing Agencies and Tribes; and the availability of HUD-approved housing counseling agencies.
Hundreds of personnel from FEMA have been deployed to the disaster area, while the USDA is deploying food assistance programs for displaced residents. The State Department has also granted a fee waiver for people who lost their U.S. passport book or passport card as a result of the wildfires. The U.S. Army Corps of Engineers has also been deployed to clear roads and bolster electric service, while the Environmental Protection Agency is on-site to assist with household hazardous waste removal that will be “essential to begin recovery work in the impacted areas.”
But there are other issues that could present problems for the area as rebuilding begins, particularly with regard to homeowners insurance, according to recent coverage by the New York Times.
The status quo of relatively low home insurance rates — solidified by a general lack of natural disasters striking the islands — could be upset by the fires, which may exacerbate other issues impacting Hawaiian housing such as gentrification.
When Hurricane Iniki devastated the island of Kauai in 1992, Hawaii’s state legislature established a fund to provide hurricane insurance for homeowners. That program was dissolved in 2002, however, since the private insurance market was built back to “full strength,” according to the Times. While wildfires have not been a major problem for Hawaii in the past, this latest disaster could signal to insurance carriers that they could become more of an issue in the future.
“I think insurers are going to start factoring in the increased frequency and severity of wildfires,” David Marlett, a professor of risk management at Appalachian State University told the New York Times. “You’ve already seen that in California.”
With the increasing prevalence of natural disasters across the U.S. and the world, insurance companies have reacted by pulling back coverage in habitually-impacted areas. Recent data from Redfin showed that housing markets with flood and wildfire risk are booming since that additional climate risk has translated into lower costs in certain areas.
But insurance carriers themselves are pulling back or leaving, notably in California and Florida, and they’re citing climate risk as a primary driver.
If you’ve already qualified for Social Security Disability Insurance (SSDI), you can earn up to $1,050 a month without triggering the income programs that could affect your benefits. If you’re still applying for benefits, you generally won’t qualify for disability if you make more than $1,470 a month ($2,460 if you’re blind)
.
The Social Security Administration (SSA) has several work incentive programs to help disability recipients continue working. These include a trial work period (TWP), where there’s no earnings limit for nine months, an extended period of eligibility (EPE), which allows you to earn under the SSA’s limit for 36 additional months, and a Ticket to Work program, which offers free employment services.
Here are the rules for SSDI and how to work part time without losing your disability benefits.
Rules for receiving disability benefits
You can still work part time and receive SSDI benefits if you don’t meet the SSA’s requirements for “gainful” employment, according to Aleyda Toruno, a Work Incentives Planning and Assistance (WIPA) coordinator with Disability Rights California.
The SSA uses earnings guidelines called substantial gainful activity (SGA) to determine whether someone’s disability qualifies them as needing additional benefits.
The SGA for 2023 is $1,470 per month ($2,460 if you’re blind), meaning that if you earn more than that, you likely won’t qualify for benefits.
“The rules for part-time work or return to work differ for a person who is still attempting to prove disability versus a person who has already been deemed disabled under Social Security’s programs,” says Jennifer Cronenberg, senior counsel and director of legal information at the National Organization of Social Security Claimants’ Representatives (NOSSCR).
“Anyone who is already receiving SSDI benefits who returns to any type of work should report their earnings to SSA immediately,” Cronenberg says. This is to avoid overpayment; they should also report a decrease or cease in work to avoid underpayment.
Work incentive programs
The SSA has three programs called work incentives to support disability recipients in returning to work. These can be “pathways for disability benefits recipients to test their ability to return to work without immediately losing their benefits,” Cronenberg says.
Trial work period
A trial work period allows a disabled person to test their ability to earn an income on their own for a set amount of time
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You’ll trigger a TWP automatically if you start earning over $1,050 per month while already receiving SSDI.
A TWP allows you nine months, not necessarily consecutive, in a rolling 60-month period in which you can earn any amount of money and still receive your full SSDI benefits.
You must still meet the definition of a disability and report your earnings to the SSA to qualify for a TWP.
“Earning well above SGA during a TWP could trigger a continuing disability review (CDR) with SSA, whereby they may determine that you’re no longer disabled and terminate your benefits,” Cronenberg says.
Extended period of eligibility
When the nine months of a TWP end, an extended period of eligibility gives you 36 more months to continue working and collecting SSDI.
Your income must stay below the SGA limit for the year ($1,470 for 2023, $2,460 if you’re blind) during an EPE.
Your benefits will be suspended if you earn above SGA during the 36-month period, but they can be reinstated if your earnings dip below SGA again.
If you earn above SGA but have other work incentives that apply, you can continue receiving benefits, Toruno says. For example, any work expenses that a person incurs because of their disability — such as transportation to and from work or specialized work equipment — are deducted from their earnings
.
Ticket to Work program
The SSA’s Ticket to Work program connects SSDI recipients with free employment services such as career counseling and job placement to help them return to work
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Ticket to Work provides services instead of placing earnings limits. It’s “something that a person who is receiving SSDI can participate in if they would like help returning to the workforce, with the goal of reducing their need for SSDI,” Cronenberg says.
The SSA won’t conduct a CDR (and potentially suspend your benefits) while you’re participating in Ticket to Work.
Anyone receiving SSDI and interested in working qualifies as long as they are still disabled.
Frequently asked questions
What is a work incentive?
The SSA offers work incentive programs to help SSDI recipients return to work. A trial work period and extended period of eligibility allow you to continue to earn income, and the Ticket to Work program offers education, training and rehabilitation programs for individuals who need help looking for or staying in work.
Does SSI offer the same work incentives as SSDI?
SSI offers its own set of work incentives and programs that come with different rules and stipulations than SSDI. You can learn more on the Social Security website.
What happens if I lose my job while I’m on a trial work period?
If you start earning money that triggers a trial work period and then lose your job, you’ll keep your benefits. If you lose your job within your 36-month extended period of eligibility, you’ll need to contact the SSA to have your benefits reinstated.
Will I lose my Medicare coverage if I lose SSDI benefits?
No, you’ll still receive free Medicare Part A coverage for at least 93 months after your trial work period if you stop receiving SSDI payments because of your earnings. This is one of SSA’s work incentives. You’ll still need to pay a premium to receive Medicare Part B.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
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Updated: August 15, 2023
5 Min Read
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Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Declaring a major in college isn’t a minor decision, but that doesn’t mean you can’t change your mind at some point down the road. Indeed, roughly one-third of undergraduates actually change majors at some point during their college careers, and around 10% change majors more than once.
While the decision to change your major can be stressful, actually making the switch doesn’t have to be. The key to a smooth transition is to do some strategic planning and to keep up communications with the university.
Read on to learn how to learn more about how to change your major.
First, Declaring a Major
Many colleges and universities ask undeclared students to choose a major by the end of their sophomore year. That’s because many students spend the first year or two taking general education classes.
Once a student is ready to declare a major, the official process will vary school by school. Generally, a student will need to schedule a meeting with their assigned academic advisor, and might need to meet with a department advisor for their chosen major.
In a department or advisor meeting, students will review their academic progress and roughly outline the rest of the required courses they need in order to complete their major.
These courses and their timing aren’t set in stone, but it can help give students an idea of how heavy their course load will be until graduation, and set expectations for how long it’ll take them to complete the degree.
From there, the request to declare a major needs to be approved by that specific department or college. That might be as informal as a meeting or as formal as an application. 💡 Quick Tip: Pay down your student loans faster with SoFi reward points you earn along the way.
Possible Reasons to Change a Major
Deciding to change majors is a personal choice. There’s no one sign for all students. In fact, a combination of factors may inspire a switch.
While not an exhaustive list, here are a few reasons a student might feel it’s a good idea to change majors:
• More excitement about a different area of study: Maybe a computer science student is more excited by a single art history elective than anything else on their schedule. If they dread every class but the elective, it might be time to change majors. Of course, a major isn’t only about passion for the subject, but that does come into play. When nearly every class is boring, it might be time for a change.
• Poor grades: College courses should be challenging, but if a student is regularly failing, or just barely passing required courses, it might be time to consider a different major. Not only does it indicate that the area of study might be outside someone’s talents, but bad grades can also jeopardize graduation and completing the degree on time. If a student is giving a course her all and still coming up short, it might be time to consider alternatives.
• Really, really good grades: This might sound counterintuitive, but if courses aren’t challenging, then the major might not be the best fit. If a student feels bored in class but continues to ace the coursework, it might be a good idea to look at other majors or consider a double major or minor.
• Money: Selecting a major is often the delicate balance between something loved and something that leads to a career post-graduation. Picking a major solely because it could mean big bucks after college could lead to regrets down the line. Remember that post-grad life should feel fulfilling, too.
• An awful internship: Now this can be a little tricky. If students end up hating a summer internship related to their major, they should try to evaluate if it was the work or the management that they disliked. It might have been a poor fit culture wise but a good fit workwise.
If any or all of the above sound familiar, it might be time to think about changing majors. Additionally, it might just be helpful along the way to evaluate satisfaction with a major, even if you decide to continue in that area of study.
Recommended: Credit Hours: What Are They & What You Need to Know
Considerations Before Changing a Major
If it feels like it may be time to change majors, here are a few considerations to keep in mind before crossing the t’s and dotting the i’s:
• What courses transfer? If the desired new major is far outside the current area of study, a student might have to basically restart college. For example, a psychology major who changes tack to engineering might not have much overlap on core curriculum. Just like mapping out courses when declaring a major the first time, students should consider doing the same before changing majors. It can show how much work or courses will be required.
• Will it cost more? Depending on school pricing or area of study, changing majors might end up costing a student more in the long run. That could be from additional course fees or taking more classes to catch up over the summer. Once the course load is mapped out for a major change, crunching the numbers is a good idea.
💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.
• Will it take longer? It may not be possible to graduate in four years if the new major is vastly different or the change comes late in an academic career. More time at school could mean more taking out more student loans. (Then again, less than half of bachelor’s degree earners graduate within four years.)
• Will it line up with post-graduate goals? It’s important to enjoy an area of study, but it’s also important to ensure it aligns with jobs a student wants after graduating. If a premed student switches to international relations but hates the job prospects, that might be a poor choice.
Time, money, or heavy course loads don’t have to squelch a change in major, but they should be factors a student is aware of before making the switch.
How to Change a Major
The reality is, deciding to change majors is likely harder than the actual process of doing so. Changing majors won’t be so different than declaring a major in the first place.
First, a student should schedule a meeting with their current academic advisor to talk through the choice. The advisor may be able to offer insight or even provide course recommendations in the new major.
Typically, the student is required to fill out a short form and have their current as well as new academic advisor sign it to make the major change official.
Depending on the college or area of study, a student might have to apply to the specialty school on campus they wish to transfer to as well.
Recommended: 20 of the Most Popular College Majors
The Takeaway
How to change your major? It requires thought and a talk with your academic advisor. Changing majors can alter a lot about the college experience, from course load to post-grad plans. It can also impact how many years you’ll spend in school and the total cost of your education.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
In the next breath, he noted again the company’s financial performance, despite the headwinds. “But UWM has demonstrated its strength because of the foundation we’ve built for years and years. We can succeed in all of these markets. While other companies are exiting the market, losing money, shrinking and laying people off, we are the … [Read more…]
Whether you’re in the heart of Orlando, Florida, or the sprawling landscape of Oklahoma City, the dream of renovating or updating your property is nearly universal. And a project like building a detached garage combines practicality with creativity, providing space for your vehicles, storage, and hobbies. However, beginning this project requires careful planning and execution to ensure that your detached garage not only meets your needs but also adheres to local regulations and stands the test of time.
In this Redfin article, we’ll take you through each step of the process and what to expect, from researching and planning to adding the finishing touches. Whether you’re aiming for a small workshop or a spacious multi-bay garage, this guide will serve as your roadmap to success.
1. Research and planning
Local building codes and zoning regulations: Research your local municipality’s building codes and zoning regulations. These guidelines will dictate aspects such as setback requirements (how far the garage must be from property lines), maximum height, size restrictions, and any necessary permits. For example, some areas might require a minimum distance of five feet from property lines.
Permits: Obtain the necessary permits before beginning construction. Common permits might include building permits, zoning permits, and possibly environmental permits if your area has specific regulations regarding construction on the land.
Design considerations: Think about the purpose of your garage. Will it simply be for parking vehicles, or will you need additional space for storage, a workshop, or other uses? Consider the number of bays, ceiling height, and any unique features you’d like to incorporate.
2. Design and budget
Layout and dimensions: Sketch out the layout of your garage, including the placement of doors, windows, and potential interior walls. Decide on the dimensions based on the space available and your needs. For example, a two-car garage typically measures around 20 feet by 20 feet, but you might need more space if you plan to include a workspace.
Roofing and siding choices: Choose roofing materials and siding options that complement your home’s design and suit your climate. Asphalt shingles, metal roofing, and cedar shakes are some common roofing choices, while options for siding include vinyl, wood, and fiber cement.
Cost estimates: Research the cost of construction materials, labor, permits, and other potential expenses. Obtain quotes from contractors for the work if you plan to hire professionals. Be prepared for unexpected costs that might arise during construction.
3. Site preparation
Choosing the location: Select a location on your property that is both practical and adheres to local regulations. Consider factors such as ease of access, distance from the main house, and terrain. For example, if your property has a slope, you might need to consider leveling the area before construction.
Clearing the area: Remove any vegetation, debris, or obstacles from the chosen construction site. This might involve clearing shrubs, trees, rocks, or other objects that could impede construction equipment or foundation work.
Excavation and grading: If your chosen site isn’t level, you’ll need to excavate and grade the area to create a flat and stable foundation. This might involve moving soil, adding fill dirt, and compacting the ground to ensure a solid base for construction.
Utilities and drainage: Check the location of underground utilities (water, gas, electrical lines) before digging. Ensure proper drainage by grading the area away from the garage site to prevent water accumulation around the structure.
4. Foundation and footings
Foundation Type: Choose the appropriate foundation type based on your garage’s design, local climate, and soil conditions. Common options include:
Slab-on-grade: A concrete slab poured directly on the ground surface. It’s cost-effective but lacks a crawl space or basement.
Crawl space: Elevating the garage slightly with a crawl space underneath for ventilation and access to utilities.
Full basement: Providing additional space and potential for utilities but is more complex and expensive.
Excavation and footings: Excavate the area according to the foundation type chosen. Pour concrete footings that will support the weight of the garage walls and distribute it evenly across the ground.
Concrete slab: If opting for a slab foundation, pour and finish the concrete to create a level surface. Ensure proper curing to prevent cracking.
5. Framing and structural work
Wall framing: Use the appropriate framing materials (wood or steel) to build the garage’s walls. Follow building codes and engineering specifications to ensure structural integrity. Place framing members at the correct intervals to provide stability and support.
Roof trusses or rafters: Depending on your design, install roof trusses or rafters to form the roof’s framework. These components should be accurately positioned and securely fastened.
Sheathing: Apply sheathing (plywood or OSB panels) to the exterior walls and roof to create a solid surface for siding and roofing materials. This also contributes to structural stability.
Bracing and reinforcements: Install diagonal bracing and reinforcements as needed to prevent sway or structural weaknesses. This is particularly important in areas prone to high winds or seismic activity.
6. Roofing and siding
Roofing material: Install the chosen roofing material, considering factors such as durability, aesthetics, and weather resistance. Common options include asphalt shingles, metal panels, clay tiles, or wooden shingles.
Weatherproofing: Ensure that the roofing material is properly installed, and all seams and edges are sealed to prevent leaks. Install appropriate underlayment, flashings, and ventilation to promote moisture control and prevent condensation buildup.
Siding installation: Apply the selected siding material to the exterior walls. Follow manufacturer instructions for installation and maintain proper clearances to avoid moisture-related issues. Different materials may require specific installation techniques, such as nailing patterns and overlapping.
Insulation: While not part of the traditional roofing and siding process, this is a good time to consider adding insulation to the walls and roof if it wasn’t addressed during framing. Proper insulation helps regulate temperature and improve energy efficiency.
By carefully executing these steps, you’ll create the foundational structure of your detached garage and establish the exterior shell. These steps are crucial for ensuring the stability, weather resistance, and overall functionality of your garage.
7. Electrical and plumbing
Electrical planning: Determine the garage’s electrical needs based on its intended use. Plan the placement of outlets, switches, and lighting fixtures. Decide if you’ll need dedicated circuits for power tools or other equipment.
Wiring installation: Install electrical wiring according to local electrical codes. This involves running wires through walls and ceilings, connecting them to outlets and switches, and ensuring proper grounding. Hiring a licensed electrician is recommended for safety and compliance.
Electrical fixtures: Install light fixtures, outlets, and switches as per your electrical plan. Consider energy-efficient lighting options for both interior and exterior spaces.
Plumbing (if applicable): If your garage requires plumbing for a sink, bathroom, or other utilities, this is the stage to install the necessary plumbing lines, fixtures, and drainage systems.
8. Doors and windows
Garage doors: Install the garage doors based on your design. Choose from single or double doors, sectional doors, or roll-up doors. Ensure proper installation and mechanisms for smooth operation.
Windows: Install windows to allow natural light into the garage. Choose window sizes and placements that enhance both aesthetics and functionality. Properly seal and weatherproof around windows to prevent leaks.
9. Interior finishing
Insulation (if not done earlier): If insulation wasn’t installed during framing, add it now. Proper insulation helps maintain a comfortable interior temperature and reduces noise transfer.
Drywall or paneling: Cover interior walls and ceilings with drywall or paneling, depending on your design preference. Proper installation and finishing techniques are crucial for a polished appearance.
Painting and finishing: Paint the interior surfaces to enhance the space’s aesthetics. Choose paint colors that complement the overall design and lighting of the garage.
Flooring: Choose and install the appropriate flooring material for your garage. Options include concrete, epoxy coatings, rubber mats, or even tiles. Consider durability and maintenance when making your choice.
10. Final inspections and touch-ups
Inspections: Schedule final inspections with local authorities to ensure that your garage complies with building codes and regulations. This may include structural, electrical, plumbing, and fire safety inspections.
Addressing inspection feedback: If inspectors identify any issues during the final inspection, address them promptly to ensure compliance. This might involve making corrections, adjustments, or improvements.
Landscaping and exterior: Complete any exterior work, such as landscaping, driveway installation, and exterior lighting. This enhances the overall look of your property and provides a welcoming environment.
Final touch-ups: Take care of any remaining cosmetic touch-ups, such as paint touch-ups, caulking, and garage cleaning. This ensures that your detached garage is ready for use and visually appealing.
By following these final steps, you’ll complete the construction of your detached garage and transform it from a construction site into a functional and aesthetically pleasing addition to your property.
When you’re fighting your way through the holiday hordes at the mall, it can be tough to get into the Christmas spirit. Luckily, some people–and places–seem to be immune to those troubles.
Here are 5 places that really go above and beyond.
1. Santa Claus, Indiana
With a name like that, you can bet this Midwestern town has a little extra Christmas spirit. Because of its name, the local post office receives thousands of letters to Santa each holiday season. And since 1914, a group of volunteers called Santa’s Elves have been answering each one.
The town boasts several holiday themed attractions, like the Santa Claus Museum and Santa’s Candy Castle.
Even the locals get in on the action. A large portion of the town’s 2,481 residents reside in Christmas Lake Village, a gated community containing three lakes: Christmas Lake and Lakes Holly and Noel.
2. The Garabedian Family House, New York
MARIO TAMA/GETTY IMAGES, via NY Daily News
For more than 40 years, the Garabedian family of the Bronx has been putting up an elaborate holiday display, with dozens of party-going mannequins dressed to look like celebrities and fictional characters. The whole display was the project of the family’s matriarch Nelly, who was a seamstress. Over the years, the collection has grown, with the help of her children.
The yearly spectacle is one of New York’s best-loved holiday displays. It even has its own Yelp page.
3. North Pole, Alaska
Santa Claus, Indiana has some competition for most Christmas-obsessed town.
In North Pole, the street lights are decorated like candy canes and the world’s tallest fiberglass Santa lives outside Santa Claus House, a Santa-themed trading post that attracts tourists in the warmer months.
Much like Santa Claus (the town, that is), North Pole receives a lot of letters each December. Community groups also work hard to respond to them all.
4. Durango, Colorado
via colorado.com
No place screams “Christmas” quite like snowy, mountainous ski country. Durango happens to have all that and more.
From November to January, the Durango Silverton Narrow Gauge Railroad transforms into the Polar Express, complete with all the characters children remember from the book. And that’s not even getting into their program of other holiday-themed events.
5. Holiday World, Indiana
via roadtrippers.com
Alright, so Holiday World takes more than just Christmas seriously.
This holiday-themed amusement park (located in previously mentioned Santa Claus, Indiana) has sections for Halloween, Thanksgiving, and the Fourth of July, in addition to Christmas.
The one downside?
It closes each year from October to April—though Santa does stick around throughout the normal operating season to have a chat with any children already planning ahead for Christmas morning.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
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GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
When I became an accredited investor, I found myself among an elite group with the financial means and regulatory clearance to access investments that many couldn’t. This opened doors to exclusive realms like hedge funds, venture capital firms, specific investment funds, private equity funds, and more.
Even though I had this “exclusive access” it took me awhile to start investing in alternative asset classes.
The Securities and Exchange Commission states that as an accredited investor, I possess a level of sophistication that equips me to craft a riskier investment portfolio than a non-accredited investor. While this might not be universally true for everyone, in my case, I had demonstrated the financial resilience to bear more risk (see barbell investing), especially if my investments took an unforeseen downturn.
One of the intriguing aspects I discovered was that investment opportunities for accredited investors aren’t mandated to register with financial authorities. This means they often come with fewer disclosures and might not be as transparent as the registered securities available to the general public.
The underlying belief is that my status as a sophisticated investor implies a deeper understanding of financial risks, a need for less disclosure on unregistered securities, and a conviction that these exclusive investment opportunities are apt for my funds.
On a personal note, as a practicing CFP®, I hadn’t always worked with accredited investors. Early in my career, I didn’t quite grasp the allure. But as time went on, I began to see the broader spectrum of investment options available to accredited investors.
As I learned more the clearer it became why this realm was so sought after. The variety and potential of these exclusive opportunities were truly eye-opening, reshaping my perspective on the world of investing.
Introduction to Accredited Investors
An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. They are entitled to this privileged access because they satisfy one or more requirements regarding income, net worth, asset size, governance status, or professional experience.
The concept of an accredited investor originated from the idea that individuals or entities with a higher financial acumen or more resources are better equipped to understand and bear the risks of certain investment opportunities.
Historically, the distinction between accredited and non-accredited investors was established to protect less experienced investors from potentially risky or less transparent investment opportunities.
Regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), have set criteria to determine who qualifies as an accredited investor, ensuring that they have the financial stability and sophistication to engage in more complex investment ventures.
Criteria for Becoming an Accredited Investor
To be classified as an accredited investor, one must meet specific criteria set by regulatory bodies:
Criteria
Description
Income Requirements
An individual must have had an annual income exceeding $200,000 (or $300,000 for joint income with a spouse) for the last two years, with the expectation of earning the same or a higher income in the current year.
Net Worth Requirements
An individual or a couple’s combined net worth must exceed $1 million, excluding the value of their primary residence.
Professional Credentials
Recent updates have expanded the definition to include individuals with certain professional certifications, designations, or other credentials recognized by the SEC. Examples include Series 7, Series 65, and Series 82 licenses.
Business Entities
Entities, such as trusts or organizations, with assets exceeding $5 million can qualify. Additionally, entities in which all equity owners are accredited investors may also be considered accredited.
Best Investment Opportunities for Accredited Investors
Here’s a rundown of some of the top investment for accredited investors…
1. Fundrise
Minimum Investment: $500
Best for: Newbie Investors
Fundrise has revolutionized the real estate investment landscape. By democratizing access to real estate portfolios, it allows individuals to invest without the complexities of property management or the need for vast capital. The platform’s innovative approach provides exposure to a traditionally lucrative, yet often inaccessible, sector of the market
Through Fundrise, investors can access a diversified range of properties, from commercial ventures to residential units. The platform’s expert team curates these portfolios, ensuring a balance of risk and reward. With its user-friendly interface and transparent reporting, Fundrise has become a top choice for many venturing into real estate investments.
How it Works: Investors start by choosing a suitable investment plan on Fundrise. Once invested, the platform pools the funds with other investors and allocates them across various real estate projects. As these properties generate rental income or appreciate in value, investors receive returns in the form of dividends or appreciation.
Pros:
Diversified real estate portfolios.
User-friendly platform with transparent reporting.
Cons:
Limited liquidity compared to public markets.
Returns are dependent on real estate market performance.
2. Equitybee
Minimum Investment: $10,000
Best for: Experienced Investors
Equitybee offers a unique platform that bridges the gap between private companies on the cusp of going public and potential investors. This innovative approach provides a golden opportunity for investors to tap into the potential of startups and other private firms before they make their public debut.
The platform’s primary focus is on employee stock options. By allowing investors to invest in these options, they can potentially benefit from their appreciation as the company grows. With a vast array of companies, from emerging startups to established giants, Equitybee presents a diverse range of investment opportunities.
How it Works: Investors browse available stock options from various companies on Equitybee. Once they choose an option, they invest their funds, which are then used to purchase the stock options from the employees. If the company goes public or gets acquired, the investor stands to gain from the increased value of these stocks.
Pros:
Access to pre-IPO companies.
Diverse range of startups and established firms.
Cons:
Platform fee of 5%.
Potential risks associated with private market investments.
3. Percent
Minimum Investment: $500
Best for: Novice Investors
Percent stands as a beacon in the vast sea of the private credit market, illuminating a sector often overshadowed by traditional investments. This burgeoning market, valued at over $7 trillion, consists of companies borrowing from non-bank lenders. Percent offers a unique vantage point into this market, allowing investors to diversify their portfolios beyond typical stocks and bonds.
The allure of Percent lies in its ability to offer shorter terms and higher yields, combined with investments that are largely uncorrelated with public markets. This makes it an attractive proposition for those looking to step away from the volatility of traditional markets.
How it Works: Upon joining Percent, investors are presented with a plethora of private credit opportunities. After selecting an investment, funds are pooled with other investors and lent out to companies seeking credit. As these companies repay their loans, investors earn interest, providing a steady income stream.
Pros:
Access to the burgeoning private credit market.
Potential for higher yields.
Cons:
Requires understanding of private credit dynamics.
Less liquidity compared to public markets.
4. Masterworks
Minimum Investment: $10,000
Best for: Novice Investors
Masterworks paints a vivid picture of art investment, blending the worlds of finance and fine art. Traditionally, investing in art was a luxury reserved for the elite. However, Masterworks has democratized this, allowing individuals to buy shares in artworks from world-renowned artists.
The platform’s strength lies in its expertise. From authentication to storage, every facet of art investment is handled meticulously. This ensures that investors can appreciate both the beauty of their investments and the potential financial returns.
How it Works: After registering on Masterworks, investors can browse a curated selection of artworks. They can then purchase shares, representing a fraction of the artwork’s value. Masterworks takes care of storage, insurance, and eventual sale. When the artwork is sold, investors share the profits based on their ownership.
Pros:
Opportunity to diversify with fine art.
Managed by art experts.
Cons:
Art market can be unpredictable.
Long-term investment horizon.
5. Yieldstreet
Minimum Investment: $15,000
Best for: Advanced Investors
Yieldstreet stands at the intersection of innovation and alternative investments. It offers a smorgasbord of unique investment opportunities, ranging from art to marine finance. For those looking to venture beyond the beaten path of traditional stocks and bonds, Yieldstreet presents a tantalizing array of options.
The platform’s allure lies in its curated selection of alternative investments, each vetted by experts. This ensures that while investors are treading unconventional grounds, they’re not stepping into the unknown blindly.
How it Works: Investors begin by browsing through the diverse investment opportunities on Yieldstreet. After selecting their preferred asset class, their funds are pooled with other investors and allocated to the chosen venture. Returns are generated based on the performance of these assets, be it through interest, dividends, or asset appreciation.
Pros:
Wide range of alternative investments.
Potential for high returns.
Cons:
Some niches may be too specialized.
Requires a deep understanding of chosen investments.
6. AcreTrader
Minimum Investment: $10,000
Best for: Newbie Investors
AcreTrader, as its name suggests, brings the vast expanses of farmland to the investment table. It offers a unique opportunity to invest in agricultural land, combining the stability of real estate with the evergreen nature of agriculture. With the global population on the rise, the value of fertile land is only set to increase.
The platform meticulously vets each piece of land, ensuring only the most promising plots are available for investment. This rigorous process ensures that investors are planting their funds in fertile ground, poised for growth.
How it Works: Investors peruse available farmland listings on AcreTrader. After selecting a plot, they can invest, effectively owning a portion of that land. AcreTrader manages all aspects, from liaising with farmers to ensuring optimal land use. Investors earn from the appreciation of land value and potential rental income.
Pros:
Stable, tangible asset.
Potential for steady returns.
Cons:
Returns may be slower compared to other platforms.
Limited to U.S. farmland.
7. EquityMultiple
Minimum Investment: $5,000
Best for: Experienced Investors
Summary: EquityMultiple is a testament to the power of collective investment in the real estate sector. By leveraging the principles of crowdfunding, it offers a platform where multiple investors can pool their resources to finance high-quality real estate projects. This collaborative approach allows for diversification and access to projects that might be out of reach for individual investors.
The platform’s strength lies in its curated selection of real estate opportunities, ranging from commercial spaces to residential properties. With a team of seasoned real estate professionals at the helm, EquityMultiple ensures that each project is vetted for maximum potential and minimal risk.
How it Works: Upon joining, investors can explore a variety of real estate projects. After committing to a project, their funds are pooled with other investors to finance the venture. Returns are generated through rental incomes, property appreciation, or the successful completion of development projects.
Pros:
Diverse real estate opportunities.
Managed by real estate professionals.
Cons:
Market risks associated with real estate.
Longer investment horizons.
8. CrowdStreet
Minimum Investment: $25,000
Best for: Advanced Investors
CrowdStreet stands as a pillar in the commercial real estate investment domain. With its vast experience and industry connections, it offers a platform where investors can tap into prime real estate projects across the nation. From bustling urban centers to tranquil suburban locales, CrowdStreet provides a diverse range of investment opportunities.
The platform’s expertise ensures that each project is meticulously vetted, offering a blend of potential returns and stability. For investors looking to delve into commercial real estate without the hassles of property management, CrowdStreet is an ideal choice.
How it Works: After registration, investors can browse a myriad of commercial real estate offerings. Upon investing in a project, CrowdStreet manages the investment, providing regular updates and ensuring optimal project execution. Investors earn returns based on the project’s performance, be it through rentals, sales, or project completions.
Pros:
Access to prime commercial properties.
Established platform with a proven track record.
Cons:
High minimum investment.
Market dependency for returns.
9. Mainvest
Minimum Investment: $100
Best for: Newbie Investors
Mainvest offers a refreshing twist in the investment landscape, focusing on the heart and soul of the American economy: local businesses. From quaint cafes to innovative startups, Mainvest provides a platform where investors can support and benefit from the growth of small businesses in their communities.
The platform’s community-centric approach ensures that investments are not just about returns but also about fostering local economies. For those looking to make a difference while earning, Mainvest presents a unique opportunity.
How it Works: Investors can explore various local businesses seeking capital on Mainvest. By investing, they essentially buy a revenue-sharing note, earning a percentage of the business’s gross revenue until a predetermined return is achieved.
Pros:
Support and invest in local businesses.
Low minimum investment.
Cons:
Risks associated with small business investments.
Returns might be slower compared to other platforms.
10. Vinovest
Minimum Investment: $1,000
Best for: Novice Investors
Vinovest uncorks the world of wine investment, offering a blend of luxury, history, and financial growth. Fine wines have been a symbol of opulence for centuries, and Vinovest provides a platform where this luxury becomes an accessible investment.
With a team of wine experts guiding the way, the platform ensures that each wine is not just a drink but an investment poised for appreciation. From sourcing to storage, Vinovest handles every facet, ensuring the wine’s value grows over time.
How it Works: After signing up, investors set their preferences and investment amount. Vinovest then curates a wine portfolio based on these preferences, handling sourcing, authentication, and storage. As the wine appreciates, so does the investor’s portfolio.
Pros:
Unique investment opportunity in fine wines.
Managed by wine connoisseurs.
Cons:
Long-term holding for optimal returns.
Market influenced by external factors like climate.
11. Arrived Homes
Minimum Investment: $100
Best for: Novice Investors
Arrived Homes offers a fresh perspective on real estate investment, focusing on the charm of single-family homes. While skyscrapers and commercial complexes often dominate real estate discussions, single-family homes offer stability, consistent returns, and a touch of nostalgia.
The platform’s strength lies in its focus. By concentrating on single-family homes, it offers investors a chance to tap into a stable real estate segment, benefiting from both rental income and property appreciation.
How it Works: Investors browse available properties on Arrived Homes. After selecting a property, they can invest in shares, representing a portion of the home’s value. As the property is rented out, investors earn a share of the rental income. Additionally, any appreciation in property value benefits the investors.
Pros:
Low minimum investment.
Quarterly dividends.
Cons:
New platform with a shorter track record.
Limited to single-family homes.
12. RealtyMogul
Minimum Investment: $5,000
Best for: Novice to Experienced Investors
RealtyMogul stands tall in the commercial real estate investment landscape. It offers a platform where diversification meets opportunity, presenting a range of commercial properties for investment. From bustling office spaces to serene residential complexes, RealtyMogul provides a plethora of options for investors to expand their portfolios.
The platform’s prowess lies in its dual approach. Investors can either dive into non-traded REITs or make direct investments in specific properties. This flexibility ensures that both novice and experienced investors find opportunities that align with their investment goals.
How it Works: Upon joining RealtyMogul, investors can choose between REITs or direct property investments. Their funds are then channeled into these real estate ventures. Returns are generated through rental incomes, property sales, or successful project completions.
Pros:
Wide range of commercial properties.
Both REITs and direct investments available.
Cons:
Market risks inherent to real estate.
Higher minimums for direct investments.
The Future of Accredited Investing
The world of accredited investing is dynamic and ever-evolving. Emerging trends suggest a shift towards democratizing investment opportunities, with regulatory bodies considering more inclusive criteria for accredited investor status. This shift aims to balance the need for investor protection with the recognition that financial acumen can come from experience and education, not just wealth.
Furthermore, technological advancements are playing a pivotal role. The rise of blockchain and tokenized assets, for instance, is creating new avenues for investment and might reshape the landscape of opportunities available to accredited investors.
xAs the line between traditional and alternative investments blurs, the future promises a more integrated, inclusive, and innovative environment for accredited investors.
The Bottom Line – Top Investments for Accredited Investors
Understanding the role and opportunities of accredited investors is crucial in the modern financial landscape. While the distinction offers privileged access to unique investment opportunities, it also comes with increased risks and responsibilities.
As the world of investing continues to evolve, potential accredited investors are encouraged to stay informed, conduct thorough research, and seek professional advice. The realm of accredited investing, with its blend of challenges and opportunities, promises exciting prospects for those ready to navigate its complexities.
FAQs – Investment Options for Accredited Investors
Why is there a distinction between accredited and non-accredited investors?
The distinction is primarily for investor protection. Accredited investors are deemed financially savvy or stable enough to handle the risks associated with unregistered securities, which might be riskier and less transparent.
What investment opportunities open up for accredited investors?
Accredited investors gain access to a broader range of investment opportunities, including hedge funds, private equity, venture capital, certain private placements, and more.
Are investments for accredited investors riskier?
While not inherently riskier, these investments often come with less regulatory oversight and transparency, which can increase potential risks. It’s essential to conduct thorough due diligence before investing.
Do accredited investors have any advantages in the public stock market?
While the primary benefits of being an accredited investor pertain to private investment opportunities, the financial acumen and resources associated with accredited investors can also be advantageous in public markets, especially when considering more complex investment strategies.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
A great Listing pre-qualification script pulls out critical facts so you can be best prepared to not just take the listing, but to price it right in the first place! Not prequalifying is unprofessional and can waste your time and the sellers. Always prequalify, 100% of the time! Price it to sell, not to sit.
The best price reduction conversation is the one you never have to have. All pricing scripts are best used at the listing table!
Don’t lose the listing of a motivated, have-to-sell sellerover price. If they have sell, you have to take the listing! Someone is going to make a commission. Shouldn’t it be you?
Don’t go to your next listing appointment unless you know the following items:
What the seller wants, needs or thinks it’s worth
Pricing the home correctly in the first place prevents future price reduction drama. It’s not unusual for a homeowner to believe that their home should fetch a price higher than the comps. You should always find out how they arrived at ‘their’ price. Learn that information before you arrive at the appointment so you can better strategize, explain the pricing strategy and consider how to ultimately price the home.
Try saying the following when the seller requests a list price that is too high: “That’s interesting, ‘seller.’ How did you arrive at that price?” Listen to their answer, carefully!
Secret #1
Sellers overprice out of either ignorance or arrogance. Even in a hot seller’s market, there is aspirational pricing. You can price too high. Ignorance is when they just don’t know how to price a home. Square feet matters, bedrooms, baths, views and condition are all taken into account. Arrogance is when they won’t listen to comps and have reasons other than real value to try to justify their price.
Secret #2
Sometimes, especially in a low-inventory market, your potential seller client may know about comparable sales you didn’t capture. Private sales, for sale by owner and other sales not found in your MLS could be really good comparable homes, so ask good questions and don’t just assume your seller is overpriced.
The average days on the market
You should know this stat for properties like your subject property. This information helps set both your expectations and the homeowner’s expectations. Not just for your town or even zip code, but for their neighborhood, school district and MLS code. Drill down as best you can to understand the days on the market for homes as similar to theirs as possible. Sometimes even the style of the home can make a difference.
The list to sell price ratio
This data helps you combat the ‘price it high, let them negotiate’ objection. It can also help you know if you can price it right on the mark and expect to get slightly more. Are homes selling on average for 105% of the list price? Or, are sellers in the subject neighborhood typically settling at about 95% of the list price?
Know the number of homes competing with your subject property
What are you up against? How would it compare in the eyes of the buyer? If you’re showing your new listing versus its competition, do you look priced right, overpriced or priced so well you’d be dying to write an offer and snap it up?
Secret: If you’re the only home on the market in the entire zip code or MLS code, you can price it higher than you could if there were seven other competing homes, all within the same neighborhood. Especially if the competing homes are basically the same size and age. In that case, you need to be staged better and priced better than your competition or you’ll be the one who’s stuck doing price reduction calls in about 60 days.
Secret: The next time you have to do continuing education, take an Appraisal class. This will help you become more confident in your pricing strategy. It will show you multiple ways of arriving at the correct price. Don’t just use ‘cost per square foot’ to arrive at the right price!
New construction in the area that competes with your potential listing
Remember when builders provide in-house financing, they often can sell a more expensive home for the same payment as your resale. If there are new homes going up, be certain to tour them and understand the builder’s perks and financing before you go to your listing appointment.
Secret: A resale home for $350,000 may be competing with new construction as high as $500,000 if the builder has buy-downs and in-house financing with incentives that reduce the mortgage interest rate. Know what’s going on with the new construction! Have the new build salespeople explain their different mortgage plans to you. Ask lots of questions like, ‘what happens when they have build clients who need to sell their old house?’
What is the seller’s time frame
Ideally, when does the home need to sell and close by?
Secret: If they don’t actually have a time frame, you may have a problem! The less motivated they are, the higher they may wish to price the home. That is a recipe for a tough relationship.
What is motivating the sale?
When you know why they want to or have to move, you can use this to stay on task during the appointment, referring to their needs and making it more about them than about you. This can also greatly affect your pricing strategy. If they are closing on a new home in 60 days, your strategy will be different than if they want to sell first, rent for a while and then decide what to do later. If you don’t find out, you’ll be left guessing, and guessing is not a good strategy.
Secret: You can actually win a competitive listing situation by simply asking and then focusing on exactly what the seller really needs. Be the one who is their problem solver, not the agent who assumes they know everything. Sellers appreciate the attention to detail and focus on their needs.
Are they listing and buying or just listing?
Is there a referral needed for where they’re moving to? Are they already in contract on something? Is there more than one transaction for you to help them with?
What happens if it doesn’t sell?
Or, if they don’t get their ideal price? Is keeping the house an option? If they’re thinking about perhaps turning it into a rental property, you should do your research about going rates for a home like this one. Can they break even or make money on the potential lease payment, or would they be losing every month? You can see how it would affect your strategy and pricing.
How did they happen to call you?
Track your sources of business. Tracking where your listing appointments are come from will tell you what’s working. Do more of what’s working and fewer things that are speculative and costly.
What’s the bottom Line?
Don’t go to any listing appointment without having the answers to the ten points we discussed here. Knowledge equals confidence. Ignorance equals fear. You’ll present more confidently and walk away with not only the listing but also the seller’s trust. Start out the relationship right if you expect to have a great relationship, including repeat and referral business!
Tim and Julie Harris host a podcast for real estate professionals. Tim and Julie have been real estate coaches for more than two decades, coaching the top agents in the country through different types of markets.
Studies show that college tuition increased by 134% at private colleges and 175% at public universities from 2003 to 2023. So, for many families, these rising costs are making it harder to afford a college degree. To help cover these costs, many families and students start saving for college to help avoid student loans. There are many options you can use to help save money for college. For example, a 529 savings plan is specifically designed to help families save for college. However, this type of plan isn’t right for everyone. Keep reading to learn more about the pros and cons of 529 plans.
Quick Answer: 529 plans are tax advantaged savings plans to help pay for educational expenses.
In This Piece
What Is a 529 Plan?
A 529 plan is a college savings account. It provides parents, grandparents and even other interested parties a tool for saving money for their loved one’s college. In some cases, prospective students may be able to set up their own 529 accounts. The goal of a 529 plan is to save money for several years and then use this money to cover the costs of college. Similar to an IRA account, a 529 plan is an investment account. So, you have the potential to earn interest over the years.
Types of 529 Plans
There are many 529 plans to choose from but only two basic types. The most popular type of 529 plan is the savings plan. With this type of plan, you can use the money you save for tuition and related costs at any eligible university. In fact, you can even use these funds to cover private school expenses for grades K-12.
The second type of 529 account is a prepaid tuition plan. With this type of account, you’re prepaying tuition fees now to cover the cost of attendance later. The benefit is that you can lock in tuition rates well before going to college. The downside is that you’re limited to which universities and colleges the student can attend.
Tax Advantages of 529 Plans
Unlike 401(k) plans, you make 529 contributions with post-tax dollars. However, many states offer tax credits or tax deductions on annual contributions made to 529 plans. The good news is that distributions from 529 plans are tax-free as long as the money is used for qualified educational expenses.
How to Open a 529 Plan
Once you know what type of 529 plan you want to invest in, you should compare various options. Be sure to review all costs involved when making this comparison. If your state offers tax credits or deductions for 529 accounts, you may want to select an in-state plan.
When you’re ready, you can handle the application process yourself or seek the support of a financial advisor who can manage the account for you. If you have concerns about debt collectors having access to your 529 account funds, you may want to speak to a financial advisor about setting up an estate.
Once the account is open, you can make regular contributions to it throughout the year. There are also some 529 credit cards that automatically transfer cashback rewards to a 529 plan.
Who Can Open a 529 Plan?
Anyone can open a 529 plan, including parents, grandparents, aunts, uncles, and other friends and family members. You do have to designate a beneficiary for the funds in the account. Keep in mind that you may face a 10% penalty if you use the money for any purpose other than a qualified expense.
How Much Does a 529 Plan Cost?
The cost of maintaining a 529 account varies from plan to plan. You can expect to pay a variety of fees, including enrollment fees and account management fees. If you work with a broker, you may also incur brokerage fees.
How Much Can I Contribute to a 529 Plan?
There are no annual limits to how much you can contribute to a 529 plan. However, for IRS purposes, contributions up to $17,000 (for 2023) can qualify as a gift. You or a loved one, such as grandparents, can also superfund 529 plans with lump-sum contributions of up to $85,000, but it must be prorated over the next 5 years.
How Many Times Can You Superfund a 529?
There’s no limit to how many times you can superfund a 529 plan. However, you can’t exceed the state’s aggregated limits and shouldn’t contribute more than the gift limit for the year.
How Much to Save for College
According to recent studies, the average cost of college tuition and fees is $10,423 per year for public college and $39,723 per year for private college. If you plan to attend college in state, you may want to view the state’s aggregate limits, which are based on average tuition costs in the state. Once the 529 account balance reaches this maximum level, you can’t make any more contributions.
Who Maintains Control Over a 529 Plan?
The person who sets up the account maintains full control over the 529 account. The owner of the account determines when funds are distributed and the amount of each distribution. The funds must go to the beneficiary, but the owner of the account has the ability to change the beneficiary.
Does a 529 Affect Financial Aid?
When completing the Free Application for Financial Student Aid (FAFSA), you list funds in a 529 account as an asset. If this is a parent’s account, it typically has little impact on financial aid eligibility. However, if the funds come from an account established by a grandparent or other party, it’s treated as cash support. Depending on the value of these funds, these contributions can have a significant impact on eligibility for financial aid.
Qualified Expenses
For distributions for a 529 account to be tax-free, the student must use the funds for qualified expenses. These expenses include:
Tuition
Room and board
Textbooks
Computer
School supplies
How to Withdraw Funds
Funds can be withdrawn at any time by completing the required withdrawal form. Also, keep in mind that only qualified expenses are tax-free. Before requesting a withdrawal, be sure to calculate all your expenses to avoid taking out too much money. You also need to take the money out of your account the same year it will be used.
What If the Child Doesn’t Go to College?
It’s important to understand that you don’t lose your money if your child decides not to go to college. You have two options. First, you can transfer these funds to another beneficiary, such as another child or grandchild. Secondly, you can withdraw the funds.
What Happens to Money Not Used?
If you choose not to use these funds on qualified expenses, you’ll face a 10% penalty and you must pay taxes on all distributions. But, there are some exceptions to this rule. If your child receives a scholarship for college, enters the military academy, or becomes disabled and unable to attend college, you may be able to waive the 10% penalty.
Alternatives
There are a few alternatives to 529 college savings accounts, such as:
Custodial brokerage account. A custodial brokerage account doesn’t provide any extra tax benefits. However, it does give you the freedom to save as much as you want and use it for any purpose.
Roth IRA. A Roth IRA is typically for retirement savings, but in many cases, you can also withdraw funds without penalty for education purposes. However, this account does have annual contribution limits.
Cordell education savings account. The Cordell education savings account is similar to a 529 plan. But, there are strict income eligibility guidelines. Additionally, you can only contribute $2,000 per year per child.
Acorn Early. Help your child start investing money early with Acorn Early to help pay for college.
With a little planning and dedication to maintaining regular savings goals, you can help your child pay for college expenses more easily. Understand the pros and cons of 529 plans before moving forward.