529 College saving fund; explained to the layman
Gone are the days when only your skill set in a particular field could take you higher up the success ladder. Education has been the cornerstone in deciding a nation’s overall graph and continues to do so only in greater bounds. However, with increasing costs of living and cut throat competition in the world of education, the fees in any good institute are sky high. Education’s biggest goal is to reach to the common people and in this endeavor, the makers of the law decided in 1996 to open a savings platform. The College 529 Plan is so called because it was crafted under the section 529 of the internal revenue code. In the last two decades, the different plans listed under this umbrella have given tax benefits and exemption to contributors who have successfully utilized their funds in procuring higher education.
Important things to know about the plans
• There is no age bar whatsoever. So, if you think you are too old to study (which is a gross simplification) you can still open an account for your kids or better still their kids! Anyone you nominate can become the benefactor.
• There is a general misconception regarding residential stringency. The truth is anyone who is a citizen of America, irrespective of the State you live in, can apply for an account. Just in case you move out or choose a college in a different state, your funds are carried forward.
• Third in this list are the types of plans available. You have the choice between a prepaid plan that covers in full or part, your tuition fees or an investment plan in colleges. As the name suggests, the latter involves putting your funds in things like mutual funds and may need help from experts. Also, it is advisable to check the list of the affiliated colleges before you make your pick.
What do you gain out of these investments/savings?
If you are still not sure enough that enrolling under a college 529 plan is a good choice your future, the following benefits will surely bring in that clarity of thought.
• Tax exemption! When the whole world revolves around a penny saved, tax benefit attracts the maximum contributors to such plans as well. This means that after all your hard savings mature, the money is free from tax and you collect the entire amount!
• Not only can you reap benefits under the federal code, many states have started their own tax breaks and you can file for returns periodically. I am sure this gives you reason enough to continue putting in money right till your convocation day!
• Since, we are dealing with a lot of money and most importantly, hope it is fair enough for you to assess risks. The good part is that you are the boss and nothing goes haywire without your notice.