College Planning and the 529 Plan
Planning for you child's college years can be difficult if you are on a strict budget. But there are some options you should take advantage of to make paying tuition and room and board easier. College planning can include investing in a 529 plan, which is a federal savings plan that will not be subject to Federal or state taxes as long as you use the money to pay for college when the time comes. This includes using the money for books, tuition, and room and board. Even though the 529 plan was supposed to expire in 2006, the plan was made permanent by Congress as a way to help families pay for college expenses by offering tax breaks. Before investing in this college savings plan, you should consider the downsides. If you withdraw the money and don’t use it to pay for college expenses, you will have to pay state and Federal income tax along with an additional 10% Federal tax penalty. Because college planning does not take into account financial emergencies, the amount you put into the fund should not prevent you from putting some of your earnings into savings. Before committing to a 529 plan, find out if there are any other rules you need to know. If you move from one state to another, make sure that the fund is transferable without incurring any fees or penalties. College planning when your children are young can make paying for their education a little easier when they leave for college. Understanding more about the 529 plan and other options you have when saving for college can help you make an informed decision. While college planning might not always be easy, focusing on the rewards, which includes your child's education, can help you make the sacrifices a little easier to bear. Visit RetirementSavingsGuide.com to learn more.
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