May 27
The Most Popular in College Savings Accounts
Posted by admin
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You know it is definitely time to start saving for college and you keep hearing about the 529 plan. What is it and why should I start one? Today I wanted to give you some straight forward information about the most popular of the college savings accounts, the 529 plan.
The 529 plan is an education savings account designed to help families save for future college costs. It is called the 529 plan after section 529 of the Internal Revenue Code. You can use your 529 plan for qualified colleges nationwide. It does not matter what state you are in or what state your child goes to school in. However, you may want to make sure your child’s college is eligible under the 529 rules.
Every state has at least one 529 plan. Each state can differ in what it looks like. You will want to do some research before you decide what state you will create your plan in. From www.savingforcollege.com here are your top seven benefits of 529 plans:
1. Federal tax benefits – You cannot find a better deal when it comes to saving for college. Remember, you contributions are not deductible on your federal tax return, but your investment grows tax-deferred and your distributions for qualified costs come out federally tax-free.
2. State tax benefits – Each state may offer some tax breaks as well. You should research the benefits residents receive for investing in your own state’s 529 plan.
3. Donor retains control of funds – The donor stays in control of the account. With very few exceptions, the named beneficiary has no rights to the funds. Most plans even allow you to reclaim the money at any time (although, keep in mind the earnings portion of the “non-qualified” withdrawal will be subject to income tax and an additional 10% penalty tax).
4. Low maintenance – This is a very easy way to save for college. All you have to do is complete a simple enrollment form and make your contributions (I, personally, have automatic deposits). The ongoing investment of your account is handled by the plan.
5. Simplified tax reporting – You do not receive a Form 1099 to report taxable or nontaxable earnings until the year you make withdrawals.
6. Flexible – You can move your investment around and make changes. However, you will want to check with your specific plan before you start moving things around.
7. Substantial deposits allowed – Everyone is eligible! The amounts you can contribute are substantial (over $300,000 per beneficiary in many state plans). Generally there are no income limitations or age restrictions.
If you are interested in a 529 plan, I would highly recommend you speak to your financial advisor. There is no time to waste! Call now…
CATEGORY: Planning for The Future
