CollegeBacker Review: 529 Plans The Easy Way

CollegeBacker is the easiest way to get started saving for college in a 529 plan. If you're looking for an easy way to save for college - and want a solution that makes it easy to get family and friends involved, then this is it.

CollegeBacker is a platform that allows you to create a 529 college savings plan, and then provide a unique link to family and friends where they can contribute easily. This is the perfect solution for parties, holidays, and graduations!

If you're ready to start saving for college, check it out. Skip the review and open a CollegeBacker account here >>

Backer Bucks Program

One of the other great features of CollegeBacker is Backer Bucks. Back Bucks is a program that allows you to earn cash back rewards that can be deposited directly into your 529 plan if you shop online through the Backer Bucks portal. 

This is a simple and easy way to save for college by getting rewarded for the shopping that you already do.

Plus, some of their partners include financial services, such as TurboTax for doing your taxes. Why not get rewarded for doing something you have to do?

529 plans are offered by states. You can invest in the 529 plan your state offers or one offered by another state. These plans are similar to a Roth but for education. Contributions to 529 plans grow tax-free and withdrawals are tax-free when used for qualified educational expenses.

Tax benefits are at the federal level. But about two-thirds of states also allow tax savings. The following states do not offer state tax benefits: Alaska, California, Delaware, Florida, Hawaii, Kentucky, Nevada, New Jersey, North Carolina, South Dakota, Tennessee, Texas, Washington, and Wyoming. Even if your state does not offer state tax benefits, you can still set up a 529 plan through CollegeBacker.

Contributions into a 529 plan are considered gifts. For 2019, an individual can contribute up to $15,000 per child/account without gift-tax consequences. If you are married and have two grandchildren, you and your spouse can contribute $15,000 per child. That’s a total of 4 x $15,000 = $60,000.

There is also the 5-year election. This election allows you to contribute a large lump sum in one year and spread it across five years. For 2019, the 5-year election limit is $75,000. For example, if you contribute $60,000 in 2019, you can spread it across 5 years, turning the single contribution into $12,000 annual contributions.

Because the annual limit is $15,000, this leaves $3,000 available in unused exclusions per year. Some families use this election to shelter funds from estate taxes. It’s best to first speak with an accountant before applying this election.

529 plans can impact a student’s FAFSA, but it should be minimal.

Money from a 529 plan can be used for tuition, books, and other related higher education expenses, including graduate school. They can also be used for elementary and secondary school tuition. Room and board qualify if the student is enrolled at least half-time. Be sure that the school is eligible for Title IV federal student aid.

What happens if the beneficiary doesn’t go to school? Not to worry, money in a 529 plan doesn’t expire. You can change the beneficiary to someone else who might be able to use the funds.

If you decide to withdraw the money and not use it for college expenses, you’ll incur a 10% penalty plus taxes on the withdrawal at your income tax rate. If the beneficiary decides to take money out of the plan for non-qualified expenses, they’ll have to pay a 10% penalty and will be taxed at their income tax rate.

If you are familiar with UGMA/UTMA and Coverdell plans, 529 plans differ in several ways. Parents own the 529 plan, not the child. There are also no strict eligibility requirements or low contribution limits.