You Can Use a 529 Fund to Help Your Children Get To College
Posted on Sunday, July 12th, 2009 at 2:54 pm in Financial Planning
Many of you may not be well aware of the 529 plan. It may sound to you, as if three digits have been placed side by side. But in reality, the 529 plan does have a meaning and it acquires more importance in this period of financial crisis.
The 529 plan is actually a plan under which you can save more for the education of your kids. This plan is generally run under the prerogative of the government of the state. The plan has been named after Section 529 of the Internal Revenue Code, under which the plan was later created.
The 529 plan is a very convenient way of saving money for the future college education of your kids. In this way, you need not pay a fortune, when your kid grows up and start going to the college. You will be saving on a lot of money and you will be getting tax benefits too, once you start saving money under the 529 plan.
Nearly all the states have the 529 plan. But in every state the plans are different. So, you need to know and understand the 529 plan that is being offered in your state. Many states offer more than one 529 plan to the applicants. In that case also, you need to get the proper information and see, which of the plans are suitable for you.
There are much more benefits in the 529 plan. The most important benefit, apart from the ones mentioned above, is the fact that you are able to handle the account and not your kid. The 529 plan is also transferable. If your kid decides not to continue education or drops out of college, then you can easily transfer the fund to another family member. In case of the 529, it is not mandatory that you only will have to contribute. Anyone can contribute to the fund and so, the responsibilities can be shared.
The 529 plan comes with no age limit and so, there are no binding conditions that you will have to use up the fund within a given period of time. If your kid gets a scholarship, then also, you can withdraw the money that had been saved in the 529 fund. In that case, all you need to do is pay the taxes on that amount and you can use it as you want to.
Thus, the best way to plan for your kid’s college education is to save in the 529 plan. It is the easiest and the safest way to provide education to your kid, without cutting deep into your pocket.
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