529 College Savings Plan

529 College Savings Plan
Saving money for college expenses is​ a​ goal I​ hear many young parents express, and one of​ the best ways to​ build tax-advantaged savings for college is​ the 529 plan .​
a​ 529 plan is​ a​ tax-advantaged savings plan designed to​ encourage saving for future college costs .​
529 plans, legally known as​ qualified tuition plans, are sponsored by states, state agencies, or​ educational institutions and are authorized by Section 529 of​ the Internal Revenue Code .​

Changes in​ the tax code were made in​ 2018 making permanent the provision that earnings in​ a​ 529 plan are tax free upon withdrawal when used for education expenses .​
This has resulted in​ eliminating any change in​ status for earnings for the 529 plan and made it​ the premier savings vehicle for college savers.
There are two types of​ 529 plans: pre-paid tuition plans and college savings plans .​
All fifty states and the District of​ Columbia sponsor at​ least one type of​ 529 plan .​

In addition, a​ group of​ private colleges and universities sponsor a​ pre-paid tuition plan .​
There are differences between pre-paid tuition plans and college savings plans, and each individual family needs to​ determine which plan may be right for their needs .​
Pre-paid tuition plans generally allow college savers to​ purchase units or​ credits at​ participating colleges and universities for future tuition and, in​ some cases, room and board .​

Most prepaid tuition plans are sponsored by state governments and have residency requirements .​
Many state governments guarantee investments in​ pre-paid tuition plans that they sponsor .​
College savings plans generally permit a​ college saver (also called the account holder) to​ establish an​ account for a​ student (the beneficiary) for the purpose of​ paying the beneficiary’s eligible college expenses .​

An account holder may typically choose among several investment options for his or​ her contributions, which the college savings plan invests on behalf of​ the account holder .​
Investment options often include stock mutual funds, bond mutual funds, and money market funds, as​ well as, age-based portfolios that automatically shift toward more conservative investments as​ the beneficiary gets closer to​ college age .​

Withdrawals from college savings plans can generally be used at​ any college or​ university .​
Investments in​ college savings plans that invest in​ mutual funds are not guaranteed by state governments and are not federally insured.

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