Backer is a simple and easy way to save on taxes and give your kids a debt-free college experience.
What is Backer?
Backer (former Collegebacker) is a Robo-advisor for 529 plans. The platform makes it easy to contribute to a tax-advantaged college savings plan and manage existing plans.
Through Backer, you get a personal education savings coach helping you navigate a complex landscape and get the most out of your 529 plan.
Backer has helped families avoid over $50 million in student loan debt. The mission is to make college affordable for every American family through collaboration and investment options.
Backer is a trademark of Principly, Inc., an SEC-registered investment advisor. The online platform helps clients save for education and does not provide comprehensive tax advice or financial planning.
What is a 529 Plan?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. “529 plans, legally known as qualified tuition plans, are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.” (SEC)
It’s a financially savvy way of saving money and paying for college costs. Because of the tax advantages, there are contribution limits and rules regarding use for only qualified education expenses. With 529 plans, the funds can pay for private school today, primary and secondary school tuition, or college expenses tomorrow.
Please understand the parents, not the child, own 529 plans. In contrast, the minor owns the UTMA/UGMA accounts.
Why Use 529 Savings Plans?
There are many reasons to use 529 Plans:
- Tax-free investing: contributions to a 529 plan grow tax-free and withdrawn tax-free to pay for educational expenses.
- Flexible and versatile: can be used for higher education, K-12, apprenticeships, and student loans.
- Transferable: can be transferred within the family.
- Financial aid: minimal impact on child’s eligibility for financial assistance compared to UTMA/UGMA accounts.
- Payoff student debt: use a 529 plan to pay off student loan debt.
If you’re looking for ways to save money for your kids’ college education and want the support of family and friends, then Backer may be right for you.
How Backer Works
Backer manages your 529 plans and helps you build a team of backers for your child, invest your savings tax-free, and stay on track of your savings goals. With Backer, it’s easy to start and manage college savings accounts with an intuitive online platform. No more clunky websites, which are often associated with 529 plans. Here’s how Backer works:
- Process simplicity. Instantly start a college fund with a 529 plan to invest your savings tax-free.
- Monitor all college savings. Connect your existing 529 plan to Backer.
- Get advice on low-cost funds and manage risk levels.
- Contribute by bank transfer, debit card, or credit card.
- Set up gift page. Invite family and friends to contribute using a customized page for your child.
- Earn cash back rewards by shopping at name-brand partners.
Backer does not hold your funds nor uses a broker to do so. Instead, they act as the intermediary that simplifies the college saving process and provides tax savings advice.
Features & Benefits
- Easy Setup: set up a plan and choose the best state program for your child in under 5 minutes.
- No minimum: there is no investment amount needed.
- Robo-advice: maximize your savings with tax-free investing and low-cost funds designed to help you save for future education expenses.
- Monitor: connect existing plans and manage them through the platform.
- You decide: choose when and how to invest using the algorithmic advice based on your answers to questions.
- Gifting: get family and friends involved with gifts and cashback rewards using a customizable gifting page.
- Cashback: earn rewards and boost your savings with everyday purchases deposited directly into your child’s college fund.
To open a 529 account on behalf of a child, you must be:
- 18+ years old
- US Citizen or Permanent Resident
There are no age or income requirements to contribute to the account.
Backer is free for the first month to give you time to decide if it’s right for you. After that, you pay a fixed monthly fee and choose the amount. You can choose to pay $1-10 (although most pay $5 per month). The fee covers the entire family.
- Account fee: Choose the amount and pay it monthly.
- Gifting fee: $0
- Asset-based fee: $0
- Cashback fee: $0
Although your Backer account is on a pay-as-you-choose model, understand there are underlying 529 plan expenses.
Who is it best for?
Backer is best for parents or guardians who want to effortlessly save for a child’s education expense and benefit from tax advantages.
Backer is a legit company. It has a 4.7 rating out of 5 stars in the App Store with close to 500 reviews.
In our Backer Review, we learned it’s the platform to help parents and guardians save on taxes and plan for educational expenses. The platform allows you to manage your investment portfolio, monthly contribution and removes the jargon and complexity of analyzing the different state programs.
And even better, you can get your family and friends involved. Instead of filling up your house with material gifts that are used and discarded, your loved ones can contribute to your child’s future. Have a birthday party coming up? You can let your invitees know they can contribute to the fund instead of buying a gift.
If you’re unhappy with the service for any reason, send an email to request how to discontinue using the service and maintaining your 529 plan.
Pros and Cons
- Tax-advantage college savings
- Low fees
- No account minimum
- Monitor and manage all college savings plans
- Gifting page for family and friends
- No human advisor access
How to start using Backer
The time needed: 5 minutes
Step-by-Step to open a Backer account
- Getting started
- Visit the website or use this link to get started.
- Enter your personal information
- Answer a few questions to get Robo-advice based on your answers.
- Start your 529 plan
- Begin investing for your child’s future.
- Connect existing 529 Plans
- Link your existing accounts and monitor them all in one place.
What happens to my Backer 529 plan if my child doesn’t go to college?
If your child doesn’t go to college, you can change the beneficiary to another who can use the funds. Otherwise, if you withdraw the money for other reasons, you’ll incur a 10% penalty plus taxes at your current income rate.