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529 Qualified Tuition Savings Plans
There are numerous advantages to the 529 Qualified Tuition Savings Plan, including the fact that the federal tax advantages can save you thousands!! They are currently offered by various states, through the help of a professional money manager or a State Treasurer's Office. The plans can be extremely different, and so it pays to ask questions.
One key way that the 529 Qualified Tuition Savings Plan differs from 529 Pprepaid Ttuition is that you can contribute a lot more money for your child's future educational needs. These funds can be used for graduate as well as undergraduate schools, and can be used for many non-tuition/ non-mandatory expense needs.
Advantages:
- As of 2002, Federal-tax free on both earnings and deductions.
- Beneficial gift tax treatment (Contribute up to $55,000 per beneifiary in a single year without federal gift tax consequences.).
- Some plans allow an annual contribution of up to $265,000.
- No age restrictions.
- Easy to change beneficiarieis
- You keep control of the money until you direct it to the student
- No income phase-out restrictions.
- No residency requirements--you can purchase a plan from any state.
Possible State tax advantages if you live within a state that has a plan with in-state advantages
Disadvantages:
- As with all investments, plan proceeds are not guaranteed, and you can lose principal.
- You may not lock in current tuition rates.
- Opening an account in no way guarantees admission college.
- Since most plans are only 18 months to 3 years old, there’s
not much in the way of long-term performance track records.
- Account owner will be subject to a 10% tax penalty for
withdrawals made for any reason other than college expenses,
with the exception of death or disability of the beneficiary.
Should your child be offered a full scholarship, congratulations! Some scholarships allow you to name a new beneficiary or withdraw the money penalty-free.
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To open a 529 plan account, click here for further 529 QTP information from Women's Financial Network at Siebert, where Smart Women Invest.
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