Saving for Your Student’s Future: The Benefits of a 529 Plan
In today’s world, you don’t have to wonder whether or not your child will be aiming for a college education, but in today’s economy you might have to wonder whether or not you can afford it.
That’s what makes a 529 Plan a valuable asset for every parent whether your child is five months away from college or five years away. The top benefits of a 529 Plan are as follows.
The account remains in your control
Unlike some savings accounts that are designated to the beneficiary when they come of age (usually at 18), the 529 Plan will stay under your control, so you can determine when, where and how the funds are distributed, ensuring that the money lasts throughout your child’s educational process.
A 529 Plan provides both state and federal tax benefits.
- State tax benefits. Many states offer tax deductions and other benefits for contributing to a 529 Plan. Check your state benefits at SavingforCollege.com.
- Federal tax benefits. While you can’t deduct your 529 from your federal taxes, your funds grow tax-deferred and all funds used to pay for tuition are distributed tax free.
- Additionally, you won’t have to report any contributions or earnings from your 529 until the year you make your first withdrawal.
529 Plans are available to everyone
No matter what your age or income, you can make contributions to a 529 Plan. The same is true of beneficiaries.
529 Plan limits are sky high
No matter where your beneficiary goes to school, you can contribute enough money for tuition—the limit is typically over $300,000.
529 Plans offer greater flexibility
If you need to move your 529 to another state, change the beneficiary or add or remove certain options, most 529 plans will allow you to do so within reason and without penalty.
Your 529 is anything but high maintenance
Unlike many other savings accounts, with a 529 you sign the enrollment application, set up direct deposit (if you wish), sit back and forget about it. You don’t need to manage your assets—the plan manager does it for you.
You can open a 529 Plan whenever you want
Most college savings plans have a specified enrollment year or period each year. 529 Plans are open for enrollment year round and you can open one for your child at any age.
529 Plans cover all allowable expenses tax free
Allowable expenses for college include tuition, books, room and board. Many other types of savings plans do not include room and board as allowable expenses.
While 529 Plans are available to everyone, regardless of age or income, they may not be right for everyone. Be sure to investigate all of your college savings plan options before selecting one for your student.