Archive for the ‘529 plan’ Category

4 Reasons to Start a 529 College Savings Plan

Thursday, October 25th, 2012

The 529 college savings plan is a relatively new way to save for college.  The plans are very versatile and can be used for all sorts of expenses and have many benefits:

  • Tax Benefits – There are some really nifty tax benefits for the 59 plan. Aside from the fact that money you invest grows tax free and is not taxed upon withdrawal down the road, many states (you’d have to check for your state individually) actually allow you to deduct the amount you invest each year from your state tax bill as well! This actually resulted in a state tax refund for our family over the past few years.
  • Easily Transferred – These plans are very flexible and can be transferred to all kinds of family members ranging from other children to parents to nieces or nephews. Frankly, if you put money in a plan, the likelihood that you wouldn’t have someone else to transfer it to if your initial recipient didn’t go to college is quite low. And if worse came to worse, it’s not like the money is lost. You just need to pay a 10 percent withdrawal fee along with any taxes owed.
  • Much Better Than ESAs – The first program for college savings was called an Education Savings Account. Aside from the lower limit of $2,000 annual contributions, the fees in those programs tend to be much higher as well. The 529 college savings plans have much higher rates, and in states that allow you to deduct the contributions from taxes, those amounts are often five figures per year. Since all the states have their own programs and people can participate from other states, the competition has driven down the fees to consumers, which is a great thing.
  • Control – This is another very nice feature of the plan.  Some people may be reluctant to put a lot of money in someone else’s name since years down the road, anything could happen. Relationships can sour and priorities can change. But with the 529 plan, the person who opened the account has full control of the funds up until the time of use. As mentioned previously, you can even change your mind and withdraw the money yourself!

These are all great reasons to start up a 529 account, so the next step is to check out your state’s plan and whether other states offer a better

deal. Then get started!

 

The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.

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