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Intro to 529 plans

529s Insights

Introduction to 529 College Savings Plans

Ajay Singh May 28, 2019

Two Types of Plans

  • College savings plans are the most common. Essentially, you contribute funds to the plan over time and can withdraw them tax free to pay for your college education (or other qualified education expense) wherever you decide to attend.
  • Pre-paid tuition plans allow you to “lock-in” the price of education at today’s prices. Many of these plans are flexible and allow you to attend whatever college you want. After all, it’s hard to predict which college your child will go to in 18 years.

Tax Advantages

If you live in a state that levies an income tax, it may make sense to invest in your state’s plan. However, most 529 plans are open to all United States residents. You should shop around to find the best plan for you.

Unlike many retirement savings plans, there are no “income phase outs” to prevent high net worth families from investing in 529s and reaping the tax benefits.

529 Fees

Investment Limits

Furthermore, 529 plans have no income restrictions in order to contribute.

Alternatives to 529 Plans

  • Coverdell Education Savigns Account (CESA)
  • Custodial Accounts (UGMA/UTMA)