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retirement of your dreams. Let's jump right in. Hey, Dave. How are you doing today? I'm doing great, Nick. How are you? I am doing well. Thank you for asking, sir. I know we usually go into a little bit about what the weather is doing today, but not even worth because we have a special guess, We're gonna skip right over. And Know everybody's gonna be real bummed about missing out on our weather conclusion our little chat. Yeah.
I digress. Because today, we have Diane Brewer, who is the director of the Michigan education trust and oversees the 05:29 savings plans along with Michigan Education Trust. And so we have a bunch of questions for her. But before we do that, Diane, would you like to introduce yourself to the listeners and tell us a little bit about yourselves? Thank you. I'm Diane Brewer. I'm Mig. Executive director for the Michigan Education Trust, and that's the state's prepaid 05:29
college savings plan. And I've been here starting my 20 first year this year. So I came in basically as a presenter and Outreach specialists helping make payments to out state schools and just helping parents grandparents and their students get to college and pay for with this little student debt or no student debt. Yeah. Great. I love it. And actually, that brings up a good question I have. Sounds like you've been there from, like, the ground up, When did the 05:29
plan. When do that? Start. I don't even know. I feel like that's some knowledge I should have. But... Yeah. That's okay. The met program actually pre dates... Start 05:29 statue. That was the first prepaid program in the nation, So the premise is that you're offering credit hours at today's price for use in the future. So when you're buying credit hours, for a newborn, you know that it's going to be 18 years of tuition increases before
that trial goes to college. Yeah. And, you know, they've got 15 years from high school graduation to use that. So maybe there's a gap year or... For or military service, you know. Sure. When they Are ready to go to college then, the trust makes up the difference because college has gone up those years. It's not the liability of the purchaser to make up the difference. It's the trust that's making up the difference. And that's how you're saving
by pre planning on college tuition. And those jumps says I'm sure you're aware are very low. Large these days in terms of yeah. I hope that tuition is going up every year. So We know it goes up. Yeah. Yeah Yes. Large So I think 1 of the big burning questions that we always get from listeners is kind of how do you take the met? Program that you just talked about. And then the Michigan education savings plan, which is the, you know, 05:29 version and how do you
differentiate between those 2? How do you suggest that parents decide which route to go? Yeah. And we here that a lot ourselves too. And So here within the Department of Treasury, when we say Michigan Education Trust, we also oversee. Me space. So Met, and Me are what we call direct sold. So there's no commission structure. There is a program, Michigan Advisor plan that does have a commission structure, but what I can address today is the differences between Met an Me.
Perfect. And how an individual would make up their mind. And first, I would say, this can be used together Yeah. Perfect world because we're always asked this question. Because Meta is specific to tuition. The only exception really is scholarship. Or you can use that money for other instances. And Me is very broad. It could be used for to and room board and books and lab fees and all those other things that come along with college experience.
So in a perfect world a student would have some tuition locked in with Met, and then there would be an Vs account. However, that doesn't fit everybody's. Budget that doesn't fit everybody's desire for how much and what they can do for their student. So They're perfectly open and free to, make a choice depending on what's going to work best for them. So with Med, in both of these plans, because they're both are 05:20 nines, so we'll hear them a lot people say. You know,
I don't know about Matt. I want that 05:29. Well, we're both 05:20 nines, which means we both have the same tax advantages nhs. You Okay. The thing about 05:29 college savings vehicles is the tax savings. So... As a Michigan resident using a Michigan program, you get a schedule 1 deduction for monies that you put in. On the programs.
And with methods the full contract value with Me, there are caps as to what you can claim each year or an individual is 5000 or for couples filing jointly, it's 10000. And that's every year that you're contributing to the program now, you can put in more, but what you can claim is that 5 or 10000 dollar deduction. And then federally, all 05:29 programs have the advantage of not being taxed on earnings as these accounts are growing.
In the end endgame, when these are used for qualified higher education expenses, you're not taxed either on the earnings. You would be taxed on the earnings if you pull the money out for other expenses or the child didn't go to college at that point, It's based on the earnings only because these 05:29 plans are already after tax dollars. You've already paid taxes on what you've put in. So fees there would just be on the earnings.
The way I would put it to a client, I think, and it it'd be interested in your take on this is that with the Me, your department is taking the investment risk. Yes. Right. The the client knows their outcome, kind of like a... A pension plan or or some other product like that where you're paying today's dollars for future tuition. You don't have to worry about whether The market is
up, the market is down. You just know that you have certain amounts of tuition covered where the Me, you're taking on some investment risk. But you're gaining some flexibility. Exactly. Good. I like the idea of working of using them together. Haven't done that, very often. I've had some clients with some of each, but usually, they were independent decisions done at different times. And we've spoken with Very purchasers who have started Me, knowing that as their Me grows, then they
would lock in some credit hours. They might build it out to the point where they've got a semester worth of tuition and roll it over because rollover are acceptable between 05:29 programs. So they can be used that way too. So the Me program, I believe there's several different options as far as, like, how much tuition you wanna purchase and how to pay for that. Is that correct? Yes. There's 3 different options for the plans that we offer, and then there's different
options on the pricing. Structure. So we have 2 university level programs, a full limited university level program and then we have a community college program. So first, you decide which program you wanted. Maybe you live in an area, you've got us... Strong community college or child's a little bit older, maybe they're in middle school, and you... And they've got a particular leaning and you think this is gonna be great. We're going to go to the local community college.
So you can lock in the in district tuition with the contract, or maybe you don't know, but you want them to go to universe or maybe there's a legacy legacy, and you want them to go to the same place you want to. So you know that... Well, this is 1 of the more expensive schools in the state. I want the full benefits of program, I want them to be completely covered if I buy 30 credits, I wanna know of I've got 30 credits.
The difference with the limited benefits program is that for most of the colleges it will pay based on what you buy 30 for 30. And I use 30 because that's usually what it takes for a year But knowing that, the pricing is a little bit less, and there are some schools with higher cost than others. We look at it and go well, if the school is over a hundred and 5 percent of the weighted average with a limited benefits program. We have to pro down.
What we can actually cover. You may have purchased 30 credit hours thinking, I went to Ferris, my wife went to Ferris, my child old is going to go to fairs. They're even talking about going to fairs because this happened in my family. Everybody was going to go to fairs. And then in the end, you know, as a senior and in a high we're like, hey, U of them has this great program. It's just what I want, and that's where I'm
going. Well, you of them then because of the price structure with the limited benefits we would cover 27 out of 30 and the student we'll get the rest. So you still get a good benefit. But it's another option for someone who you know, believes in that kind of a structure going, yeah, Well... And we can, you know, kind coach people on ways to make up for that. Obviously, if you have a 4 year met
and you're in that situation. If you pay those 3 credit hours when they're freshman, going come a lot less than paying it when they run out as a senior. Yeah. That surprises a lot of people with the jumps. Yeah. Yeah. Because there's different fee structures for junior and Seniors. Yeah. And is plus the annual tuition increases because those don't stop. Because you're in college. So, you know, we'll help people mitigate as
much as we can. But those are the 3 different options, You would say, well, yes, I won't met of which plan do I want. And then beyond that, there's... How am I going to pay which pricing option, what I like. When that started, it was all lump sum. It was 1 year, 2 year, 3 year or 4 year. And as times have progressed as tuition have gone up as there's more 05:29 programs now to bounce ideas off, and see what working for people.
It wasn't maybe after just the first year, people said, well, I'd like to do this, but I need a monthly purchase plan. So there's a monthly purchase plan. And for, about the last 8 years, people have been saying, I need a lower entry point. So now there is pay as you go. And that's working out very nicely like, the obligation there is that you open the contract by purchasing 1 credit hour. And after you purchase at 1 credit hour, you can make deposits at will, minimum 25
dollars. So you have to keep in mind, credit you know, what are the current credit hour costs? If I put in a hundred dollars, Yes, I'm buying fractions of credits, but those can add up, and and it's a great gifting opportunity let cram and grandpa grandparents aunts and uncle uncles know, basically, all they need to know is contract number. They don't see any information they can go online and they'll they'll see them the
name of the student. They'll go, yes. I'm giving money to the right student, you know, and make a gift toward the 05:29 net in Me has a gifting program too. I yeah. I remember when I started my daughter's Me back in maybe 2003.
It... Everything was still paper back then. And I remember that the monthly statements actually had deposit slips that you could give to grandparents aunts and uncles And I remember talking to clients back then because it was fairly common for grandparents to buy savings bonds for. Yes. To do do take the give give grandparents those deposit slips instead of having them buy savings bonds for birthdays Anyway, I kinda missed those paper coupons. Well, we could probably work in and get you feel.
I I think you can download a form for that but those Well, I'll tell you, Diane, what I don't miss is having to make tuition payments and say for college anymore. I'm beyond that now. Congratulations. Thanks. Which is the help of the Michigan Education savings plan. So I'm curious. Obviously, not everybody goes to College and Michigan to which I always say, if you aren't looking hard enough out of Michigan like, every
we have such great schools. I don't know why people leave is what I'm trying to say fun. They do. And I know that's a worry for parents of, like, what happens if my kid goes out of state. Mom, and there are some provisions. Right? That. Correct? Definitely. A wonderful question and we hear that a lot. But since day 1, there's always been a provision. It's really a formula. What we do is we calculate what we would have been sending to a Michigan public university
on behalf of your child. So different contracts will have slightly different formulas. But let's say you've got a full benefits contract and your student decides to go out of. State, We would look at the average tuition of the Michigan Public universities in the year that your student presents their paperwork to us. You know, 15 years down the road or 18 whenever it was purchased for them. When they tell us they're going out of state, we look at the average tuition,
per year. We look at the number of years or the number of credit hours in some cases and multiply those 2 figures, and we divide it out by 4 payout over 4 years. So we've always been able to accommodate those students reasonably who are going out of state? Is it going to cover their full tuition, like order in Michigan, probably not. Right.
There was a time where there were some schools where we'd actually be sending leftover over money back because I've been paying bills for students for, you know, more years ago. And you know, Florida Kentucky, Georgia, They had good schools, but they had a lot of public funding and their tuition just weren't that high. So They go to school. We'd pay the bill. And the end of this summer, we'd send the money back to the... What we call the refund does and they usually the purchaser.
On. Like, but that's not so much the case anymore. But there's always been those provisions for not only outer state schools, but we have another formula for in state, private institutions. So if they're going to do a k College or university of Detroit, Davenport, we can also make payments to those institutions. Do you work for Michigan State University? Are you looking for solid retirement planning advice?
Reach out to Dave Nick, hosts of the kitchen table finance podcast and certified financial advisors. They specialize in the unique benefit plans offered by Ms and how to capitalize on all you have available to you through your investments. Sure. You can glance at your package once a year and check some boxes offered or you can make your money work for you.
Find out if you're getting everything you could be with your Ms asu retirement plan by contacting shot well rudder bear financial planners at sr b advisors dot com or simply search for the kitchen table finance podcasts wherever you get your podcasts, That's the kitchen table finance podcast hosted by shot well Rudder Bear financial planners. When when we're dealing with clients on the planning end. Usually the objections focus around, well, what if what if this happens? What if my son
doesn't go to college. What if my daughter gets a scholarship, Yeah, it seems to me that the evolution of these plans in general has been to eliminate and reduce those objections. Yeah. We've always always had a provision for scholarship. That's a beautiful place to be because the scholarship. We've got options, especially if it's a full tuition scholarship because you can transfer those benefits to another child.
You can cash it out, and then you've got the money for the room in the board and the books or whatever you would like to do with it. Partial scholarships, we usually work with the school. So that the student gets their full partial scholarship and all of their met money. In that instance, we'll let them pass left meant money into room and board and those other expenses. So there's always been those options, and there's always been a provision for the instance when
your child says I'm not going to... You can get the money back based on tuition increases over the years, you're entitled to your earnings. But that's when your earnings will be subject to income tax at your tax rate plus a 10 percent equity fee for simply cashing it out and not using it for education. So my understanding is some recent legislation even made a little bit more flex. As far as move money into roth Ira so you can start saving for retirement. Yes.
That is currently under works. And we don't know all the details yet. And we're still deep dependent on all of the federal regulations. But what we know is that the opportunity to Exists now to take leftover over 05:29 monies and roll them into a Roth Ira for the beneficiary. For the student, not for the purchaser owner. And we know that the account the 05:29 account had to have been in existence for 15 years.
And the smaller rules are still to be clarified, but, It's a, you know, it's a it's a very exciting option. Yes. It's it's always fun that you know, Congress can pass these rules and make these broad proclamation, and then they live leave it up to folks like you to work out the details after the fact. Right? Yeah. Yes. And that and that's what's going on. You, we've belong to, as a 05:29, we belong to
the college savings pro program that. Savings plan network, which is part of Nas, the National Treasures association for the State Forge, and they're doing a lot of work, to clean up the details so we can be able to tell people, you know, exactly how this is going to work. We're not quite there yet, but we're getting there Another great option. It sounds like so I think
that's gonna be super helpful for people. We another, you know, another reason, another reason off the list of objections to savings for college is the way I look at it, It's probably not going to actually be relevant for most of our clients. But if it's another thing that makes it psychologically easier for a parent or grandparent to put money aside for college. I'm all for it. As our way here. We're, you know, accommodating the federal initiative to accommodate
trade schools and apprenticeship. We've got a bit of a hurdle here in Michigan about the tax free status, which we're currently working on. There's some, you know, going to be some legislation. That will maybe loosen that up, people have always been able to, and you wouldn't probably realize it unless you called in and talk to us, but people we've always been able to... At least work out a refund for someone who says, what we saw most often when I started paying bills was, c programs.
And then Emt programs and, electrician through community colleges and sometimes that individual having that refund and then themselves certifying as to, you know, what was a qualified spence and what was. And so we've always been able to accommodate, but now with this broader federal language, we've got more room, but we have to clear the hurdle of making a tax free. And that's what we're working on. Good. Awesome. Good. That's important stuff. Most important programs right now for sure. Yeah.
Yeah. Good. So I'm curious, Diane, in your 20 years of experience. I'm sure you've seen a lot have you seen, are there common mistakes or misunderstandings that you see people make when it comes to these programs? 1 mistake is that what we see is people that feel like they've waited too long and it's not going to make a difference. And that's simply not true because anything you can put in in save something you're not going to have to come up with right
in the road. We see people concerned about how having a 05:29, they're at Me how it's going to impact their financial aid eligibility. Well, my child isn't going to be able to get, you know, the pull Mh. Free money if I've saved up too much money. And that's 05:20 nine's are actually the the least offensive. Yes. Yeah. To what contributes to the family income. It's, like, 5.56 percent somewhere around there it might be off I think you're... I think you've put right on.
Yeah. You mean, whereas if the student was account was set up for the student in their name, it's 20 percent. And if you pull money out of your 04:01 k or your Ira rates, it's 50 percent. Yeah. That... So it really is a good place to be. So that's something that is helpful when people understand that. And for met, we've always fought... While you can't use it out stay. Ego here. It changes form. Those are the most common. Mh. It it's interesting to me
that that provision has been around. Forever because I had I had actually thought Diane that that was a change in the last 10 or 15 years. I'm married. So so I was a victim of that miss forever reception myself there for a while. Most of our students do stay in state. You know, there's a this percentage is quite small that go out state, but we do have... We've worked with over 2500 different other state
institutions in a few outside the country. If they are eligible, to accept federal aid under the Department of Education in their degree granting, we can pay out of countries calls too. And we've done that on a few seconds. So we talked about some of the mistakes, Diane, but I'm sure you've seen your share of 6 assess stories do you have any that you can share with us? Oh, we have people coming forward on a regular
basis and what we started... Seeing about 10 years ago was, the generational aspect of people coming to a My child needs a met contract. My parents or my grandparents put me through college with Met and I must. Do this for my child. And so I was looking through a a few of them this morning. And just as an example, we had heard couple years ago from a young man, and he was telling us that his parents got him a met a when he was in middle school, and they told him about
it. Now, this is a another thing we hear, you know, some parents tell their children about it and use it as incentive. And others want to surprise them with it. But in his case, they told him about it, and he just kind of shrugged it off, you know? Yeah Yeah. Okay. You know what's that? Yeah. Okay. That's nice. Thanks mom and Dad. Well, when he was of college age, He went to Grand Rapids community college for 2 years, and he enjoyed it. He did well, happened
to meet his wife there. And then they both went on to G u to Grand Valley State University. They both got their degrees. And got married after then and what they noticed was that he had a lot less college debt, practically no college debt as opposed to his wife who didn't have him at. But they're both very successful, and he has a business now north of Grand Rapids and his wife works and manufacturing. And when he had contacted us, they have a 2 year old
at that point. So it's isn't it's been a couple years, but they were determined that he was going to come out like his dad did with the relatively low college death. And so that's just 1 of the many success stories will hear in a year. Sometimes people will when they think about saving for college shelf, they'll think all or nothing and something is better than nothing. So Yeah. You've got a situation to go in and just do a lump sum 4 year met contract.
Maybe you do 1 year met. If you've got children, If you're gonna be in the situation where they're close together and you're going to have 2 or maybe even 3 in college at the same time. Having a year or 2 of met, for each of them can make a big difference because you can manipulate when you're going to use that to help out. Right. In my lifetime, I've dealt with at least 3 parents of triplets. Half, man.
And, you know, they're always very, very happy in taking a a deep of breath, you know, because they'll come, all they have to say is, how do I activate this? We no problem. You can do that online now. It used to be a paper form. So there's just all kinds of success stories and ways to look at this. And ways to look at 05:29 as a tool to do what you want to do for your children and for your grandchildren. I love
it. I love that part. It's interesting so my kids have Mu plans, and I have a son who's 12 now. We have conversations, about I kinda wanted to use it as a way to, like, teach him how saving and investing works. And so we have conversations around it. Well, as a 10 year old, you know, he looks at those numbers and he goes, why can I have that now? I wanna buy a fishing.
And we have those conversations around, well, future cohen will be real ups if we spend all your college money on fishing rights. And so I kinda use it as a great way to teach my kids about, like, saving and investing and how important it is. So it's just interesting how people look at that. So I think we just figured out who our next podcast guest is gonna be. Oh, I'm sure he would love it. Cool. I'm curious. With your experience, what do you think the
future holds for college savings plans? You think there'll be more changes or more importance put on it? Well, certainly, we're striving for more importance to be put on it because whether it's... A trade a community college, a degree or an advanced degree. The workforce needs educated individuals to do so many different functions. So this is a way to help. And yes, we have to stress the importance of knowing what opportunities are out there to help.
I think 05:20 nine's are going to continue to be flexible as the face of education changes as other options come available, as the federal government gives us a greater, scope, we're going to adapt to those and make the most of them. Make the most of it for You know, our citizens are children, everybody. Absolutely love it. Well, this has been fantastic, Diana. I could sit here and listen you tell us stories. All day long.
I could. I do have some work to do, but no. I appreciate you joining us is there, what would you tour our listeners? What would you say is the best way to get more information about these programs? 1 way is to visit our website, and it's set with met dot com, or you can go to. Mi saves dot com. And there you'll find the logos for all 3 programs, and you could read up on met me s p and even get some more direction on Map.
So great sources of information there. They'll give you ways to set up 1 on 1 meetings with met staff with Me staff and talk more about the programs and you know, how you get started because course I actually done mine these days. Yeah. Yeah. Yes. It's very easy. Yes. You Very cool. I didn't realize you had so many resources where you can actually meet with people too. I think that's fantastic. So... And I have both of those websites booked bookmark. I will tell you. So I'm a frequent visitor.
But Well, with that, Dave Diane, and it has been applied, diane. Thank you so much for joining us, and we appreciate all that you. Thank you for having. Thanks me. I appreciate it. Diane. It, fun. Gather around and follow the kitchen table finance podcast to learn about money and simple ways you can invest right now. You can find more practical advice at sr advisors dot com and contact that for personal planning by emailing info at sr advisors dot com. Aim This is a media production.