529 Plans for Charlotte, NC Families: How to Save for College with Equity Compensation

“Evan we just had a baby and want to start saving for their college. How do we get ahead?”

First congratulations. Second welcome to the reality that college costs are no joke.

Right now a single year at a public university including tuition, housing, and books runs about $30,000. If tuition inflation continues that could be $70,000 or more by the time your newborn tosses their high school graduation cap.

Private college? Let’s just say those numbers are already high enough to make your coffee taste bitter.

What Is a 529 Plan

A 529 plan is a tax advantaged investment account designed for qualified education expenses. You, a grandparent, relative, or friend own the account and your child is the beneficiary.

The big advantages:

• Tax free growth on investments
• Tax free withdrawals for qualified expenses like tuition books and often room and board

Compared to a taxable brokerage account where you owe taxes on interest, dividends, and gains, a 529 plan is far more tax efficient.

529 Plans for North Carolina Families

North Carolina no longer offers a state income tax deduction for contributions but the federal tax benefits remain.

The good news is that 529 plans are not tied to your home state. You can choose a plan with low fees, strong investment options, and easy account management. Many of my Charlotte clients use plans from Utah or Nevada for their cost efficiency.

Why Start Early

The earlier you start the more time your money has to grow through compounding.

Example:

• Save $300 per month from birth at a 6% annual return → about $116,000 by age 18
• Wait until age 10 → only about $43,000

Starting small is fine. You can increase contributions as your career grows or as equity compensation vests.

Using Equity Compensation to Boost College Savings

If you receive RSUs, ESPP shares, or stock option proceeds consider earmarking part of each vesting event or sale for your child’s 529.

Why this works:

• Lump sum boosts do not disrupt your monthly budget
• You are moving taxable income into a tax free growth vehicle
• It helps prevent lifestyle creep by redirecting windfalls toward a long term goal

Drawbacks of a 529 Plan and How to Handle Them

Powerful 529s are not perfect:

1. Overfunding Risk: If your child chooses a lower cost school or skips college you could have extra funds. Non qualified withdrawals are taxed on earnings and hit with a 10% penalty. Contributions are returned tax free.
2. Limited Use: Funds must be used for qualified education expenses. This includes tuition, fees, books, and often room and board. Some K through 12 tuition is allowed up to $10,000 per year.
3. The Good News SECURE 2.0 Rollovers: Starting in 2024 you can roll over up to $35,000 of unused 529 money into a Roth IRA for your child if:
    
   • The account has been open 15 years or more
    
   • Contributions were made more than 5 years ago
    
   • You follow annual Roth IRA contribution limits

Quick Recap of 529 Benefits

• Tax free growth on investments
• Tax free withdrawals for education
• Can be used at most US and some international schools
• Account owner controls the funds

The Bottom Line

Whether your child dreams of attending UNC, Davidson College, Queens University of Charlotte or heading out of state, your 529 savings can go with them.

If you are a Charlotte parent or parent accross the country, especially one juggling equity compensation, college savings might feel like one more thing on an already full plate. But even modest automated contributions to a 529 now can have a huge impact later.

Start early. Leverage your RSUs or ESPP. Give your newborn the gift of options.