529 Plan and College Savings

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Some benefits of 529 plans:

Tax advantages of 529 plans

The most well known benefit of 529 plans is the opportunity for tax-advantaged compounding of funds in the 529 plans and tax-free withdrawals of funds from the 529 plans. This tax incentive allows funds in the 529 plans to accumulate and grow quickly since no tax is due until withdrawn.

Earnings in 529 plans can compound without federal income taxes, and effective 2002-2010 withdrawals of funds from 529 plans are tax-free if used for qualified higher education expenses.

Unlimited contribution / no contribution limit to 529 plans

You can contribute as much-or as little-as you like to any 529 plans. The maximum amount that you can contribute to a 529 Plan and the minimum amount you have to contribute depend on individual 529 Plan you enroll in. In general, you can contribute larger lump sums to a 529 Plan than to many other savings vehicles, and enjoy a greater tax advantage.

Open 529 plans or accounts on behalf of anyone

With 529 plans, you can open an account for anyone, including your child, grandchild, other relative, friend, or even yourself. You can change beneficiaries easily at any time. Unlike other accounts for minors, you own the 529 plans and have the authority to change the benefiticiary any time.

Use the funds in 529 plans for more than just tuition and fees

Funds in the 529 plans are not restricted to certain expenses. The list of things you can use funds in 529 plans on includ room, board, and supplies. These are eligible expenses, among many others, that if used at any qualifying college or graduate school, will qualify for legitimate usage of funds in 529 plans. There is also no deadline for withdrawing funds from 529 plans.

Control the assets in the 529 plans or accounts

With 529 plans, you (the owner) retain the right to withdraw or transfer the assets from 529 plans, even when the beneficiary is no longer a minor. You can authorize the beneficiary to take withdrawals from the 529 plans, or you can retain this power permanently.

Invest in a 529 Plan portfolio that matches your needs

Within 529 plans, accounts are assigned to a managed portfolios based on the investment style you select. That means, you can start having a diversified portfolio of mutual funds even when you have very little money in the 529 Plan.