What is a 529 College Savings Plan?
A 529 College Savings Plan is a tax-advantaged investment account designed to help save for future higher education costs.
Why invest in a 529 College Savings Plan?
529 College Savings Plans allow you to invest post-tax dollars and grow your funds tax-free, as long as the money is used for qualified education expenses.
Qualified expenses can include tuition, books, supplies, equipment, room and board, and other required education-related fees at eligible institutions.
What types of 529 plans are available?
There are two basic types of 529 plans:
- Prepaid Tuition Plans, which let you pre-purchase tuition based on today’s rates
- Savings Plans, which are more common and function more like investment accounts
Do I have to buy a College Savings Plan in my home state?
No. You do not have to choose a plan in your home state. However, many states offer tax deductions or other tax benefits for residents who contribute to their in-state plan, so that may be an important factor to consider.
How are College Savings Plans sold?
Some plans are sold through financial advisors, but most are sold directly by states. Direct-sold plans often have no broker fees and may be a better fit for some members.
What happens if my child decides not to go to college?
If the beneficiary chooses not to attend college, you may be able to change the beneficiary to another family member.
If you withdraw funds for non-qualified expenses, the earnings portion may be subject to taxes and a penalty. 529 plans may also be used for eligible K-12 tuition without federal tax penalties.
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