Amy’s Financial Tip – Plan 529 College Fund
Who are we kidding, saving money? With the weak economy, unemployment on the rise, the cost of food, utilities, and gas out of control,who can afford to save money these days? Many of us are feeling the squeeze. So a lot of parents are putting that college savings plan on the back burner! My daughter Chloe will be entering college in 3 years, YIKES! Well, there is a college savings plan called the 529 plan that could be a way for parents to start that college fund. Especially if your kids are still young.
A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.
There's a misconception that state-sponsored 529 plans are only geared to families that send their children to a state school. That's just not true!There are two general types of 529 plans: savings programs, and prepaid programs.
The states offering prepaid tuition contracts covering in-state tuition will allow you to transfer the value of your contract to private and out-of-state schools (although you may not get full value depending on the particular state).
The tax law now permits higher education institutions to offer their own 529 prepaid programs. These will allow you to target your tuition prepayment to the sponsoring institution (or group of institutions). The Independent 529 Plan is the only such program currently in operation and you must check to see what restrictions they may place on the colleges covered by the plan.
This could be a great gift that the grandparents could contribute to tax-free. But check to make sure if there are advantages of the plan being under the grandparents or the parents name!
As always, check out the fine print and all the details in any plan you decide to go with! Education and hard work is the key to success!
What suggestions besides the Plan 529 do you have? I would love to have the info! Thanks guys!