If you are like most people with children, you know that you should be saving for college. But, the mere thought of investing; choosing the proper allocation of stocks, bonds, and funds; and then managing these investments for many years to come can send shivers up anyone's spine!
There is an answer - 529 college savings plans. 529s are special tax-advantaged plans. Not only are these savings plans easy to use, they are certainly one of the best college investment strategies available to you.
What is a 529 Savings Plan?
Named after the section of the IRS Tax code that authorizes them, a 529 savings plan is basically any state-sponsored, tax-advantaged college savings plan. A 529 allows anyone, regardless of income, to make monetary contributions which grow tax-deferred and then can be later drawn on, again, tax free as long as withdrawals are used for college costs such as tuition or room and board.
One of the major benefits of a 529 savings plan is that you don't even have to remember to save. Most 529s let you set up an automatic investment plan, similar to how your 401k operates. As little as $25 opens up a plan, and you can continue with low monthly deposits, which makes 529s attractive to all families regardless of income level.
You don't need to know the nitty-gritty details of investing because the 529 plan does it for you. But, because each state offers different plans and because you don't even have to be a resident of a state to invest in that state's college savings plan, you do need to do your homework to know which state's plan is the best one for you!
Things to Consider in Selecting a 529 Savings Plan
Once you have made an educated choice about which 529 college savings plan is best for you, all you need to do is buy the plan and let the investment tool do its work while you sit back and watch your contributions grow. It will feel like putting your college investment on cruise control!
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