What is a 529 Plan? Benefits?
A 529 plan is an investment plan specifically designed for your child’s college education. The benefits are that they are tax-deferred, they are usually tax deductible, they are tax-free, they are flexible, you can use a 529 plan from another state if you like their plan more, large amounts of money can be contributed, they have a lot of investment options, they may offer very low fees, you can use the funds to go to college out of state (if you so choose), and most 529 plans are cheap to start.
college savings plan
Glad to see you onboard, Danny. Katherine covered the answer in great detail. Well done! Let’s recap. All states offer a 529 Plan to assist parents and grandparents in funding a college education. If you select the 529 that goes with your particular state you will generally get a state tax deduction for that. There are no federal tax deductions on the 529 Plans. If you don’t like your state’s plan, you can go elsewhere, you will just lose the deduction in most cases.
There are generally a variety of choices contained within a 529 Plan. Focus your efforts on finding index funds and/or target date funds that correspond with the time in which your child will be entering college. BIG POINT: Invest directly with the state’s plan, DO NOT go through a broker. You will end up paying high commissions and ultimately that will reduce your child’s kitty as the years go rolling along. Just google 529 Plan and your state and you will be directed straight to the Plan.
Here are a extra points. You can usually start with $25. Anyone can fund the account (remind grandma and grandpa about this). You can set up automatic savings going into them (recommended) or save periodically without the automatic transfer. Get to know the rules carefully BEFORE you select this savings option so you can avoid penalties or taxes. Get started TODAY!
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