Few things are more important than your child’s college education. College graduates make $32,000 a year more than a high school graduates, according to the U.S. Census Bureau. But college is expensive. Yet, you don’t have to break the bank so your child can hit the books. A 529 plan could be your solution.
What it is
A 529 plan is a college savings plan which allows families to contribute and save for future college costs. You can open a 529 savings account for anyone regardless of age. You can even start a plan for yourself if you’re thinking of going back to school. 529 plans are the best known educational fund available to the public. During the last four years, 529 plan assets grew from $10 billion to $60 billion. All states sponsor at least one college savings plan. You don’t have to live or attend college in the same state as the sponsored plan. In Oregon the board that oversees the Oregon College Savings Plan on February 26, 2009, changed the mix of investments in the most conservative portfolios, aiming to make them more stable in a volatile market. The Oregonian reported:
The five-member panel, headed by state Treasurer Ben Westlund, is trying to restore confidence in the $770 million savings plan after its value fell by 23 percent last year, dragged down by the troubled OppenheimerFunds Core Bond Fund.
That fund was invested heavily in commercial mortgage-backed securities and financial-sector corporate bonds as their value plummeted.
529 advantages
There are several advantages associated with 529’s, including:
- When it’s time to spend the money, you do not have to pay taxes on the withdrawals as long as the money is being used for qualified higher-education expenses.
- Your money grows tax-free in the account.
- The parent can control the account and has the right to change beneficiary.
Why 529’s are needed
The skyrocketing cost of college tuition is making 529 plans more important than ever. According to a report from The College Board, a freshman at a public school this year will pay $25,500 for four years of college. A freshman attending public university in 2024 will pay $72,000. College tuition has increased at more than double the rate of inflation over the past two decades. The average student loan debt has grown to approximately $17,000. Starting a savings plan well ahead of time can help make sure you and your child’s financial security will be protected. Before investing in any 529 plan, you should consider whether you or the beneficiary’s home state offers a 529 plan that provides its taxpayers with favorable state tax or other benefits that are only available through investment in the home state’s 529 plan. You should also consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. More information about 529 plans is available in the issuer’s official statement, which should be read carefully before investing.
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