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March Madness & 529s

I imagine most people would never connect March Madness and 529s; I do. As we watched University of North Carolina, Chapel Hill play Alabama in the Sweet 16, I reflected upon the last four years.

Our daughter graduated from Singapore American School (SAS) in 2020. She lost her second semester of senior year due to Covid and spent her freshman year at Chapel Hill isolated, taking online classes at a campus that had been “de-densified.” She wanted to attend a Division 1 sports school since she never experienced a US sports culture growing up in Singapore. In her time at Chapel Hill, our daughter has made up for her lost Covid year and fully embraced sports, attending as many football, basketball, hockey, lacrosse, and soccer games as possible. 

March Madness 2022 was the highlight of her sophomore year. Regardless of the time difference, from Singapore we cheered with her as the Tar Heels beat Marquette in the first round (Round of 64), Baylor (Round of 32), UCLA in the Sweet 16, and St Peter’s in the Elite Eight. UNC made it to the Final Four! 

Our daughter got tickets in the student lottery and drove to New Orleans with friends. Her first US road trip. For college basketball fans, this Final Four made history. UNC beat Duke; it was Coach K’s last game ever and our daughter was in New Orleans to experience this historic event. Duke and UNC have a storied sports rivalry; they are ~12 miles apart and Coach Krzyzewski had dominated college basketball for 42 years. UNC lost the National Championship to Kansas by three points, but the memories of this weekend will stay with our family forever.

How do 529s fit in? We opened a tax-advantaged 529 as soon as our daughter had her Social Security number. We funded the 529 regularly, never using target date/enrollment funds but choosing aggressive growth options since college inflation is so high. By the time my daughter started college, we had enough saved that we no longer had to worry about the cost of education, room, or board. 

As expats, the cost of college is more than just tuition, housing, food, and an expensive cellphone plan. You need to add the cost of their international flights home and your flights, hotels, meals, local transportation (car rentals, taxis), and travel insurance when you visit. These additional costs can easily add $10,000 or more per year to the cost of education.

529 plans are flexible. They can be used to cover certain expenses at eligible higher education institutions other than four-year colleges and graduate school, including community colleges, trade schools, and apprenticeships. Up to $10,000 per year can be spent on tuition costs at qualified private, public, or religious K–12 schools. 

Students can use excess 529 funds to pay off up to $10,000 in student loan debt without paying a penalty. My daughter took a $5,000 student loan to start building her credit history since she had none. This will be paid off using her 529 funds. As part of the federal SECURE 2.0 Act, up to a lifetime limit of $35,000 in unused 529 assets can be rolled into their Roth IRA as of 2024. Alternatively, funds may be kept in the 529 to use for graduate school or create a multi-generational legacy by changing beneficiaries. 

Having enough money saved in her 529 allowed us to be a part of her life and the Carolina community, flying to Chapel Hill from Singapore to attend the fall and spring parent weekend sports events. We watched the Tar Heels football team beat Syracuse, Virginia Tech, and Duke. We had the opportunity to stand on the football field two years in a row watching the players run into the stadium to fireworks, crowds cheering, and the marching band playing triumphantly. We saw the UNC basketball team beat Clemson and Virginia Tech. We celebrated all birthdays with her (except the first one due to Covid), ran 5K marathons to support breast cancer awareness, attended sorority social events, and met so many amazing Tar Heels! 

This was possible because the financial stress of sending her to college was removed by investing early and regularly in her 529. It was the time in the markets, not timing the markets. We had over 18 years for the funds to grow tax-free.

Now that we are a few weeks from graduation, we reflect on her time at UNC Chapel Hill and are blessed that we were able to fly across the world to create so many memories with our daughter and share her love of UNC. 

Unfortunately, as I finished writing, UNC Chapel Hill lost to Alabama so will not be proceeding to the Elite Eight. There will not be another chance for my daughter to attend March Madness as a UNC student, but we are part of the Carolina community and will continue cheering for their sports teams through their victories and defeats forever. GO HEELS! 

If you would like to learn more about how 529s can support your financial goals, please contact us.

This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third-party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/  and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com.