Friday, May 23, 2008

529 Plans - saving for future college costs


Taken from Sec.gov - read more

What is a 529 plan?

  • A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

Types of 529 plans
  • Pre-paid tuition plans and college savings plans.

The difference between them:
  • Pre-paid tuition plans - generally allow college savers to purchase units or credits at participating colleges and universities for future tuition and, in some cases, room and board.
  • College savings plans - generally permit a college saver (also called the “account holder”) to establish an account for a student (the “beneficiary”) for the purpose of paying the beneficiary’s eligible college expenses.

Investment options include - stock mutual funds, bond mutual funds, and money market funds, as well as, age-based portfolios that automatically shift toward more conservative investments as the beneficiary gets closer to college age.

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