Monday, March 2, 2009

529 Savings Plan

By Craig Rozelle

A 529 Plan is an education savings plan operated by a state or educational institution that is designed to help families save money for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996. Every state now has at least one 529 plan set up. The 529plan provides special tax benefits to the investor. There are two main kinds of 529 plans a savings plans and prepaid plans. Savings plans work much like a 401K or IRA by investing contributions in mutual funds or similar investments. The plan will offer several investment options from which to choose. Your account will go up or down in value based on the performance of the particular options that are selected. The second type of plan is the prepaid plans which let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Independent 529 Plan is a separate prepaid plan for private colleges. There are two different ways to invest in a 529 plan are by meeting with 529 plan manager or through a financial advisor.


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