Pencils sharpened and knapsacks packed - it’s that time of year again! Whether your kids are headed to their first day of school or you are thinking of continuing your education, there is no better time to start planning.
Did you know there is a government program to help you create a savings vehicle for any beneficiaries’ education expenses? Created by Congress in 1996, the Qualified Tuition Program is detailed in Section 529 of the Internal Revenue Code - giving 529 plans their name.
Fast 529 Plan Facts:
There are two basic types:
Savings Plans: Investments in these plans grow tax-free and can be withdrawn for educational expenses such as tuition, room and board and supplies. They are the most common type of 529 plan because you have the flexibility to use funds at any school in any state.
Prepaid Plans: Less common, these plans let you pre-pay all or part of an in-state public college education to lock-in tuition at current rates, protecting you from further increases.
You can set up a 529 plan up and name anyone as a beneficiary — a relative, a friend, even yourself. There are limited restrictions - no income restrictions on either you, as the contributor, or the beneficiary and no limit to the number of plans you set up. A great option for anyone considering returning to college or going to graduate school.
Plans are also transferable, for example from one sibling to the next in the event of a scholarship and less financial need for the individual the fund was originally set up for.
With all the benefits of tax-free, compounding investment returns on your side, what are you waiting for?