Save With A 529 College Savings Plans
529 College Plans are of basically two types. The prepaid plan and the savings plan. The 529 College Savings plan has an advantage over the prepaid plan as it does not lock the future costs at the present days prices. In fact it allows investment to grow at a rate which results in the investments equaling or even surpassing the expected future costs of higher education. The money you invest in a 529 College Savings Plan multiplies over the years without any taxation. But this money must be invested only in higher education of the beneficiary and nothing else. Anyone is allowed to make contributions in the plan. Some states allow people from other states also to invest in the plan. You could live in Virginia and choose a plan in Ohio for your grandson who lives in Mexico who wants to continue his higher education in Maine. In fact you can even open an account for yourself if you are planning to attend school. The investment ceiling is also very high, sometimes more than $200000. There are no constraints in terms of age or income in most plans. Families of various economic strata can afford the 529 College Savings Plan as the monthly contribution can be as low as $15. These accounts are not like other savings accounts, meaning the savings always stay under the supervision of the account owner and your children can use this money only the way you want them to and do not use their for other futile expenditure. So even if they attain the age of majority they cannot take over the 529 account assets. If due to some reason you decide not to use the money you have invested in the 529 College savings plan then you must not use it for other expenses as then you would not only have to pay taxes but would also have to pay a 10% fine. But you can always change the beneficiary of the account who can be anybody related to him/her. Siblings, cousins, in-laws, it could be anyone. The only drawback of the 529 college savings plan is its rigidness. The account owner cannot manage the account himself/herself. One needs to take help of mutual finds. Once you have decided where you are going to invest your assets you have to stick to it for 12 months. If you are dissatisfied with the plan you can change to a different plan but only once a year. So before you invest in a 529 College savings plan do consider the expenses. Go for a low expenditure plan. Go for a plan that offers you to choose between varieties of mutual funds. Also preferably go for your state 529 college savings plan as it will give you special benefits. |
