First things first, a 529 plan is a state or educational institution savings plan created to help families save for college!
Almost every state has an available 529 plan, and they can be used to help with the cost of qualified colleges all over the nation. Not sure if your college qualifies? Take a look at the list of eligible institutions here.
So, how do you enroll? You have two choices. You can invest directly with a 529 plan manager, or through a financial advisor. The 529 plans are typically categorized as either a savings or prepaid plan.
The difference? Savings plan operate similar to 401K or IRA, where you choose investment options. The value of your account will increase or decrease depending on the performance of your investment option. A prepaid plan allows you to pre-pay all or some of the cost for college. This is usually for in-state public colleges, but can be converted for out of state institutions as well. A Private College 529 plan exists for private colleges as well.
Something to keep in mind: educational institutions can not offer a 529 savings plan, only a prepaid plan.
529 plans have no income, age, or annual contribution limits, and they also offer income tax breaks.
If you’re planning for college, a 529 plan may be your best option for ultimate savings.
Talk to Paragon Accountants about all your future college needs, and we’ll help you decide if a 529 plan is best for you!
