Friday, December 11, 2009
529 Savings Account Benefits
By Shawn Chandok
A 529 Savings Account is operated by state or educational institutions in order to set aside money for college. Today, every state offers 529 savings accounts, however some states such as California allow you to invest a high maximum amount like $300,000. This is very useful because as we all know over the past 10 years, college tuition rates have skyrocketed. Furthermore, you can open more than 1 account if your child wishes to attend graduate school such as medical school.
Another one of the main benefits about 529 accounts is the fact that anyone can create one and they can start with as little as $25. What makes this better is that, you are never taxed on your withdrawal as long as it’s for educational purposes.
In addition, 529 Savings accounts let you invest not only in your state, but also other states your child might be considering. For example, a NY resident can invest in CA if he/she wants to attend school there. The 529 should approve any accredited collage within the US regardless of if it private or public.
One of the main disadvantages of 529 accounts occurs when you do not use the money for educational purposes. If you do this first you are charged 10% on your earnings, then you’ll have to pay federal taxes on those earnings, and finally to top it all off you will be charged an additional 10% for an early withdrawal penalty.