Introducing a segment on Thursday's NBC Today about parents saving for college, co-host Matt Lauer and the show's financial editor Jean Chatzky spent a scant twenty-four seconds on President Obama's recently announced proposal to hike taxes on college savings accounts. Lauer noted: "Talk to me a little bit about what President Obama was referring to when he gave the State of the Union address and he talked about proposing changes to 529 accounts."
Chatzsky explained the significance of the plan: "Yeah, he didn't actually say it, but he issued some language about it and essentially he's looking at taxing money when it comes out of 529 plans. Right now withdrawals are tax-free. That would be a big deal if it happens, but we're going to have to wait and see."
Moments later, Chatzky advised one of the parents on set: "...if you're worried about this 529 taxation issue, put some money in a Roth IRA. A Roth IRA can be used for retirement or college down the road, and withdrawals do come out tax-free."
The details of the President's plan to punish parents who put money aside for their children's education were first released by the White House in a fact sheet on January 17. It took NBC six days to notice the controversial proposal, with ABC and CBS continuing to ignore the news.
By contrast, on January 9, all three broadcast networks immediately seized on Obama's plan to provide "free" community college for students. All three morning shows touted the policy, while showing no interest in the cost of such an idea. That evening, NBC Nightly News provided a full report on the topic, with anchor Brian Williams gushing over the "generosity" of the "ambitious offer that could help so many families."
Will Williams now decry the harm that would be done to so many families by taxing college savings?
On Wednesday, Forbes associate editor Ashlea Ebeling dispelled the administration argument that 529 college savings accounts only benefit the wealthy:
A lot of hardworking families...are making the effort to save for college in 529 plans. There are 12 million accounts open with an average of $20,000 in each. Close to 10% of accounts are owned by households with annual income below $50,000, and over 70% of accounts are owned by households with annual income below $150,000, according to the College Savings Foundation, which has a strongly worded statement against the tax hike proposal here.
Here is a transcript of the January 22 exchange between Lauer and Chatzky on Today:
8:32 AM ET
MATT LAUER: This morning on Start Today, a bit of a stress for every parent, saving for retirement and college at the same time. It can be a daunting task. We have a few staffers here with there little ones. And get this, when these kids are ready for college, it will cost between $164,000 and nearly $400,000. That's why we've enlisted the help of Today financial editor Jean Chatzky. Jean, good morning, good to see you.
JEAN CHATZKY: Good morning, nice to see you, too.
LAUER: Want to get to these great people in a second. Talk to me a little bit about what President Obama was referring to when he gave the State of the Union address and he talked about proposing changes to 529 accounts.
CHATZKY: Yeah, he didn't actually say it, but he issued some language about it and essentially he's looking at taxing money when it comes out of 529 plans. Right now withdrawals are tax-free. That would be a big deal if it happens, but we're going to have to wait and see.
LAUER: Alright, we'll get more on that. Let's introduce some of our favorite behind-the-scenes people here at the Today show. Let's start with Patrice and her son Jensen. Nice to see you guys. Patrice, you have a question?
PATRICE: Yes. So I'm always told that I should be saving for retirement before college, but given the astronomical costs of college, how does that make sense?
CHATSKY: It makes sense because there is financial aid for college and there is no financial aid for retirement. But if you want to do both at the same time or if you're worried about this 529 taxation issue, put some money in a Roth IRA. A Roth IRA can be used for retirement or college down the road, and withdrawals do come out tax-free.
(...)
