All About 529 Plans
There is way too much that can be said about 529 plans. Of course, most of us know that they are a means available in the United States to make getting a college degree or better a lot easier than it normally would be. Before we can discuss anything else about 529 plans, we should start from the beginning and explain how they came to be.
College education in the United States is very expensive. So expensive that in a country that has one of the highest average incomes in the world, college education remains a very difficult thing to pay for. In fact, the United States has a lower proportion of college graduates in its population compared even to some third world countries.
The United States federal government on the other hand, recognizes the fact that no nation can expect to move forward or progress without a pool of college graduates and other people with higher education who specialize in various functions necessary for nation building and progress. As a result, the United States federal government, in partnership with state governments, and some private institutions, have allowed a type of tax-advantaged investment vehicle that would encourage even average income American families to save up for a college education. These investment vehicles, in the form of either prepaid credit to allow future education to be purchased at current rates and savings accounts are officially called "qualified tuition plans", but it would be more likely that you know them as 529 plans.
529 plans take their name from Section 529 of the United States Internal Revenue Code. This same code is the law that authorizes these kinds of plans in the first place. The law basically allows money in specific kinds of funds to grow unimpeded by federal taxes provided that the money only pays for eligible college expenses. What constitutes as eligible will differ depending on the plan. If there is any overriding feature about 529 plans that distinguish them from other types of funds and investments, it is their tax advantaged status. The federal government and most state governments do not tax 529 plans, unless the money is used for anything other than college education. However, different laws about 529 plans in different states cause considerable variation in specifics and plan performance. The sheer number of plans available make knowing all there is to know about 529 plans extremely difficult and the topic of college finance a highly esoteric and technical topic. To find out more about 529 plans, the internet is an extremely valuable resource. Ratings and reviews about 529 plans are available from many sources, from investment and trade news publications to individual plan subscribers. There are also books on the topic available on order over the internet or from various bookstores across the United States. However useful these sources might be however, it is always best to consult experts with any questions about 529 plans in your state, due the variations in state laws and the limited applications of some plans in some areas. Consultations from a tax adviser or a lawyer knowledgeable in the tax laws of your state would be highly recommended if one is ready to choose a 529 plan.
| 