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529 Plans are named after the section of the federal tax code that created these plans. Like Education IRAs, 529 plans provide tax benefits to individuals and families that are saving for college. Choosing a 529 plan requires some careful study of the plan's options and fees. Originally, 529 plans were offered by states and the aim was public institutions of higher education. Today, 529 plans are offered through private colleges and universities.
There are two basic types of 529 plans:
- Prepaid Tuition 529 Plans - with the prepaid tuition plan, parents and grandparents agree to a payment schedule that locks in the cost of tuition at today's rate.
- College Savings 529 Plans - with the college savings plan, parents and grandparents can contribute to the plan based on minimum and maximum installments that are set by each plan. Contributions for a single beneficiary can exceed $200,000.
There are many 529 plans offered today, make sure you understand the portability of the plan, fees, and general risks of the plan. |
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