A 529 savings plan is named for the 529 section of the Internal Revenue Code because that section was set up in 1996 to provide educational savings options for parents. These plans are governed by the state or educational institute to help parents and families prepare for the educational and financial needs of a post secondary education for children. It provides a tax free way to set aside money for future post secondary tuition costs.
The government has realized the burden that college costs puts on a family and so every state has at least one 529 savings plan available for it's residence. One good thing about these plans is that the savings can be used in another state other than the one resided in. This means that you can put money into a 529 plan in California but send your student to the college they dream of going to in New York.
529 plans have two options available. One is a prepaid plan that allows you to prepay the costs of an education at a public college that is in state. These funds can then be transferred to a private or public educational institution in a different area. There is also a prepaid independent 529 plan that is set up for private institutions. The other type of 529 plan is a savings plan that is similar in structure to a 401K or an IRA plan. Your money contributions are placed in an investment fund such as mutual funds or something similar. There are many options available for your investments and you are able to choose where your contributions go and how they are invested. The amount of your fund will either increase or decrease depending on how that particular type of fund is doing at the time.A 529 plan is an extremely popular choice with families because there are some benefits of using the plan. The money that you contribute is not federally tax free but the investment grows and that is interest deferred. Any money distributed to pay education costs are federacy tax free when withdrawn and used for tuitions. Each state has their own set of regulations for how the money is treated in regards to state taxes. It is wise to research the tax breaks and benefits provided by your state.
Many families also like this plan over other options because the person who sets up the 529 plan has control over the money and can reclaim it if they so choose without a great deal of hassle. The beneficiary does not have claim or control of the funds and therefore you can ensure that it is spent in the way you intended and not spent foolishly.
529 plans also give you flexibility while being relatively maintenance free. It is easy to set up and not worry about it. You can decide to change your plan when you want to and don't have to worry about being locked into a plan that is no longer what you want.
Anyone who has children in their lives that may someday go to college should look at whether 529 plans are the right option for them. No matter how young, or old the student may be it is always the right time to plan and think about education.
The government has realized the burden that college costs puts on a family and so every state has at least one 529 savings plan available for it's residence. One good thing about these plans is that the savings can be used in another state other than the one resided in. This means that you can put money into a 529 plan in California but send your student to the college they dream of going to in New York.
529 plans have two options available. One is a prepaid plan that allows you to prepay the costs of an education at a public college that is in state. These funds can then be transferred to a private or public educational institution in a different area. There is also a prepaid independent 529 plan that is set up for private institutions. The other type of 529 plan is a savings plan that is similar in structure to a 401K or an IRA plan. Your money contributions are placed in an investment fund such as mutual funds or something similar. There are many options available for your investments and you are able to choose where your contributions go and how they are invested. The amount of your fund will either increase or decrease depending on how that particular type of fund is doing at the time.A 529 plan is an extremely popular choice with families because there are some benefits of using the plan. The money that you contribute is not federally tax free but the investment grows and that is interest deferred. Any money distributed to pay education costs are federacy tax free when withdrawn and used for tuitions. Each state has their own set of regulations for how the money is treated in regards to state taxes. It is wise to research the tax breaks and benefits provided by your state.
Many families also like this plan over other options because the person who sets up the 529 plan has control over the money and can reclaim it if they so choose without a great deal of hassle. The beneficiary does not have claim or control of the funds and therefore you can ensure that it is spent in the way you intended and not spent foolishly.
529 plans also give you flexibility while being relatively maintenance free. It is easy to set up and not worry about it. You can decide to change your plan when you want to and don't have to worry about being locked into a plan that is no longer what you want.
Anyone who has children in their lives that may someday go to college should look at whether 529 plans are the right option for them. No matter how young, or old the student may be it is always the right time to plan and think about education.
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