Perhaps your potential Harvard graduate is still in diapers. But, given the high cost of college, you'd be smart to start a systematic college savings plan now. And one of the options available for saving for college is a 529 plan. A 529 plan is a savings vehicle that is governed by the federal government but offered by states. There are actually two types of 529 plans: college savings plans and prepaid tuition plans.
A college savings plan is an
individual investment account
to which you contribute. Your
money is allocated to your
choice of one of the plan's
pre-established investment
portfolios. Returns aren't
guaranteed, but funds can be
used at any accredited
college. Almost every state
offers a 529 college savings
plan, and you can join any
state's plan.
individual investment account
to which you contribute. Your
money is allocated to your
choice of one of the plan's
pre-established investment
portfolios. Returns aren't
guaranteed, but funds can be
used at any accredited
college. Almost every state
offers a 529 college savings
plan, and you can join any
state's plan.
As its name suggests, in a
prepaid tuition plan you
actually prepay your child's
college tuition at today's
prices. The contribution you
make today is generally
guaranteed to cover a certain percentage of college tuition tomorrow. However,
you are typically limited to your own state's plan, and your child is limited to the colleges that participate in the plan--generally in-state public colleges. The main benefit of a 529 plan is that your contributions grow tax deferred and earnings are completely tax free at the federal level (and typically at the state level too) when they are withdrawn to pay the beneficiary's qualified education expenses. However, withdrawals that aren't used for qualified expenses are subject to federal income tax as well as a 10% penalty tax. Additionally, there
are fees and expenses associated with both types of 529 plans. Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans carefully before investing. More information about 529 plans is available in the issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable
state tax benefits.
Source : Kramer Financial
prepaid tuition plan you
actually prepay your child's
college tuition at today's
prices. The contribution you
make today is generally
guaranteed to cover a certain percentage of college tuition tomorrow. However,
you are typically limited to your own state's plan, and your child is limited to the colleges that participate in the plan--generally in-state public colleges. The main benefit of a 529 plan is that your contributions grow tax deferred and earnings are completely tax free at the federal level (and typically at the state level too) when they are withdrawn to pay the beneficiary's qualified education expenses. However, withdrawals that aren't used for qualified expenses are subject to federal income tax as well as a 10% penalty tax. Additionally, there
are fees and expenses associated with both types of 529 plans. Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans carefully before investing. More information about 529 plans is available in the issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable
state tax benefits.
Source : Kramer Financial
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