Popular College Savings 529 Plan
The 529 Plan
A 529 college savings plan is a state sponsored savings plan with tax advantages (the money is put into the plan after tax, but can be invested and grows tax free, additionally, use is tax free subject to restrictions). Each state has a different type of 529 plan with different rules and regulations, so you should review for your specific state and consult with a financial advisor as to whether this plan is right for you, but as you can see there are some advantages. Another important consideration with any 529 plan is whether you want to qualify for financial aid as having savings of this type may lessen your ability to qualify for certain types of aid. This is something to consider in determining the best way to plan for college educational expenses/costs for your children. In addition to 529 plans, many state offer pre-paid tuition plans where you can pay monthly sums over time for the in state tuition which will cover the cost of tuition as a whole (some plans allow for variation and can even cover room and board as well for a larger monthly fee). As with any type of investing/savings plan, the sooner you start the better. 529 plans are offered through many popular financial institutions and are considered by many as a great way to plan for the future.
529 Plan Facts:
- Anyone can open a 529 account.
- Grandparents and others can contribute to the account regardless of who opened it.
- No income limits for those who contribute so it is a good potential way for grandparents to pass down money while avoiding certain taxes (gift/inheritance/estate tax).
- 529 proceeds can be used for both undergraduate and graduate school, and typically refunds of excess funds if left over in the plan. Typically what is not used by one sibling can be used by another sibling or relative.
- High lifetime contribution amounts allow for significant contributions for those paying it forward to their children and grandchildren.