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Neil Mukherjee 09/28/2016 When 529 plans first hit
the scene, circa 1996, they were big news. Nowadays, they’re a common part of the
college-funding landscape. But don’t forget about them — 529 plans remain a valid means of
saving for the rising cost of tuition and more. Flexibility is king 529 plans are generally sponsored
by states, though private institutions can sponsor 529 prepaid tuition plans. Just about anyone can
open a 529 plan. And you can name anyone, including a child, grandchild, friend, or
even yourself, as the beneficiary. Investment options for 529 savings plans typically include stock and bond
mutual funds, as well as money market funds. Some plans offer age-based portfolios that automatically
shift to more conservative investments as the beneficiaries near college age. Earnings in 529 savings plans
typically aren’t subject to federal tax, so long as the funds are used for the
beneficiary’s qualified educational expenses. This can include tuition, room and board, books, fees, and computer
technology at most accredited two- and four-year colleges and universities, vocational schools, and eligible foreign
institutions. Many states offer full or partial state income tax deductions or other tax incentives to
residents making 529 plan contributions, at least if the contributions are made to a plan
sponsored by that state. You’re not limited to participating in your own state’s plan. You may
find you’re better off with another state’s plan that offers a wider range of investments
or lower fees. The downsides While 529 plans can help save taxes, they have some downsides. Amounts
not used for qualified educational expenses may be subject to taxes and penalties. A 529
plan also might reduce a student’s ability to get need-based financial aid, because money in
the plan isn’t an “exempt†asset. That said, 529 plan money is generally treated more
favorably than, for instance, assets in a custodial account in the student’s name. Just like other
investments, those within 529s can fluctuate with the stock market. And some plans charge enrollment
and asset management fees. Finally, in the case of prepaid tuition plans, there may be some
uncertainty as to how the benefits will be applied if the student goes to a
different school. ![]() You may also access this article through our web-site http://www.lokvani.com/ |
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