Introduction To 529 Plans
All parents want to send their children to college for higher studies. But the main worry is the expenditure involved. Now, with 529 plans this dream can be realized effectively.
The most expensive part of going to college is paying college fees. Apart from that, there are also other additional expenses. These include rent if the student lives in the campus, the food, utility bills and other expenses. The 529 saving plan takes care of all the additional expenses.
529 plan is a state operated investment plan that provides the parents a federal, tax free means for saving money for the colleges. This is a good way to save for college as it offers great tax breaks. The 529 plan varies from one state to another. However, they are all exempt from federal income tax thus providing a solid boost to your college fund.
529 plans have two options. First is college saving plan and the second is prepaid tuition plan for your child. The first plan is like any other saving option. It is subject to market risk also. The money invested here is tax fee. It can be used for any college or university in or outside the state. The prepaid tuition plan allows the parents to lock the future tuition at any state college at the present prices. For this, the parents have to decide in advance the college that they want to send their child to. There are various things that one should know about the 529 plans. Some of these are discussed below. The income from the 529 plan is exempted from any kind of federal tax, as long as they go toward paying college costs. These saving plans have maximum contribution limits as high as $250,000 per beneficiary. These plans should be undertaken by the parents in advance and it is not on the spot option to take. Some parents think that state sponsored 529 plans are only meant for the families who plan to send their child to a state school. This is not true as there is difference between the prepaid programs and saving programs. States with the prepaid programs permit you to transfer the value of your contract to private and out of state schools. Parents should start thinking early about the education of their child in the form of 529 saving plan. Every state has different rules and regulations regarding the 529 palms. Therefore, check your state's program accordingly to see if it is a good match for your child or not. Don't leave your child's education on faith and luck. Instead plan it now in the form of 529 plans. This will ensure a brilliant future for your child.
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