The 529 College Savings Plan is an education savings plan functioned by the government that is designed to help families set aside funds to help when their children go to college. They are named ‘529 College Savings Plans’ after Section 529 of the Internal Revenue Code which gave birth to these kinds of savings plans in 1996.
There are many different types of these plans but they are typically split into prepaid plans and savings plans. Prepaid plans allow you to pay all or part of the costs of in-state public college education prior to your child actually going there. In some cases, this can also be used for private education colleges as well. A savings plan is functional via the investment of mutual funds and alike. You are offered several investment options to choose from and your account will then differ in value depending upon the option to initially select.
There are many benefits associated with opting for one of the 529 College Savings Plans on offer. Such as the following…
Federal tax benefits:
You will be offered unmatched tax income breaks, your investment will grow tax-deferred and distributions to pay for the child’s college costs come out essential tax-free. It is worth enlisting professional tax services if you require further assistance in this area.
State tax benefits:
The state you reside in may also offer various tax benefits or tax breaks in excess of your federal benefits. For example, they may offer you an upfront reduction in some of the contributions you make.
College 529 plans are flexible thus if you want to move your investment around and change different options of your scheme then you can do so. You can even roll over your account to a varying state’s program in most circumstances.
Eligibility to all:
Everybody who wants to participate in a 529 college plan can and so if you wish to make substantial payments you can. In general, there are no income limitations nor are there any age restrictions for that matter.
You are in control:
The person giving the funds is in complete control of the account and the child or whoever the money is for has no access or rights to it. You decide what withdrawals are made, why they are made, and when they are made. In most cases, you can even get back your funds if for some reason you wish to do so. Thus there is no need for you to feel that by putting your money into a plan you lose control of it as this is certainly not the case.
Maintenance is low:
A 529 plan is an easy way to save money and a very hands-off way to do so. The process of applying is just as simple as the program itself, all you need to do is decide which plan you are going to opt for and then fill in an enrolment form, and finally begin making your contributions. Then all you have to do after this is… nothing, everything else is handled for you thus you do not have to worry about it.