Are you a parent or related family member thinking of starting a 529 savings plan for a child? Starting a plan to save for college or other type of technical career training is a smart choice because small amounts are contributed monthly over time. Legally known as “qualified tuition plans”, 529 plans are also called ‘college saver plans’ and sponsored by states, state agencies, or educational institutions. To get you started, understanding the ‘ins and outs’ of these plans will help you decide if this makes sense for you to invest in for the benefit your child or grandchild:
There are Two Types of 529 Plans, pre-paid tuition plans, and college savings plans. Some common features of each are:
529 Plans (college saver plan):
- Covers all qualified higher education expenses including technical colleges and room and board, fees, books and computersContribution limits set at $200,000
- Contribution limits set at $200,000No age limit, open to adults and children and
- No age limit, open to adults and children and the beneficiary can be changed, allowing the plan to pass to another sibling or parent can use.Investment options subject to market risk, not guaranteed.
- Investment options subject to market risk, not guaranteed.
Pre-paid Tuition Plan:
- Locks in tuition prices at eligible universities, and public and private colleges
- Guaranteed or backed by state
- Have age/grade limit for beneficiary
- Owner or beneficiary must be resident of state they listed as college/university choice
- Set lump sum and installment payments based on the age of beneficiary and number of years of college tuition purchased.
To further understand the tax implications and benefits of each type of plan, as well as restrictions, contact our office to set up a time to visit. Additional information can be found by visiting the SEC (Securities Exchange Commission) website. (https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html)
Understanding the ‘ins and outs’ of college savings plans will help you decide if this investment is appropriate for the benefit your child or grandchild.