What is a 529 Plan?
If you are asking yourself that question you are not alone, in a recent study by Edward james, 79% of Americans did not know what a 529 plan was.
The study also found:
“..regionally, especially in the Northeast (39 percent in 2014, down from 45 percent in 2013) and the Midwest (30 percent in 2014, down from 36 percent in 2013). A notable decline in 529 plan awareness also occurred when looking at household income. Among those respondents with a household income between $50,000 and $75,000, awareness dropped from 42 percent in 2013 to 32 percent today.”
A 529 plan is a college savings tool.
The average cost of an in-state public college totaled $22,828 in the 2013-2014 academic year, so saving for college is more important that ever. Parents and Grandparents can set up 529 accounts jointly or separately.
A 529 plan is a investment plan designed to encourage saving for college by making the deposit into the account tax free is used only for education. The plans are named after Section 529 of the Internal Revenue Code and are administered by state agencies and organizations.
All withdrawals from 529 plans for qualified education expenses will remain free from federal income tax! Many states mirror the federal tax advantages for 529 plans by offering state tax-deferred growth and tax-free withdrawals for qualified higher education expenses.
There are two types, one which pre-pays tuition and is available 12 states. The other is a saving program typically consist of mutual funds. Many savings plans are FDIC/NCUA insured.
For more information see this column written by Michelle Sharrow,, MBA for Families Online Magazine about 529 account
Also see this chart comparing stat 529 plans, https://www.collegesavings.org/planComparisonResults.aspx?resultsId=570168
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