- A 529 college investment savings plan is a college savings investment account that grows tax deferred and is tax free when used to pay for qualified higher education expenses including tuition and books.
- A qualified 529 college investment savings plan is not a prepaid tuition plan. Your 529 college savings plan does not lock in the cost of education in the future.
- A qualified 529 college savings investment plan will help to provide the peace of mind that your investment will grow and hopefully at a rate that exceeds inflation and tuition expense increases. Qualified 529 investment plans offer the benefit of growing tax free if the funds are used to pay for higher education expenses.
- Your contributions to qualified 529 investment savings plans are not tax deductible on the federal level, but, some states do allow partial or full tax deductions for their residents.
- Anyone can participate or contribute to a qualified 529 savings plan. Qualified plans may also be used by anyone at any age provided the funds are used to pay for higher education. So, even if you're 50 years old and thinking about getting a college education after retirement, you may participate in these investment savings plans.
- Although 529 savings plans are state sponsored, you do not need to reside in a particular state to contribute to a state savings plan. Nor are you required to attain higher education within that state once funds are withdrawn to pay for education expenses.
- 529 savings plan contribution limits are not restricted due to income level. 529 investment savings plans are beneficial to everyone regardless of income level.
- Withdrawal of funds are limited and controlled mostly by the contributing plan member. Children do not have automatic access to these funds once they reach the age of majority, helping to assure that the funds are properly utilized.
- Like early withdrawal from individual retirement accounts, all earnings from 529 investment accounts will be taxed in addition to a penalty fee of 10%. The beneficiary of your qualified plan does not need to remain consistent, so that if the child you originally planned the account for decides that higher education is not for them, the plan may be transferred to another beneficiary directly related to the child.
- Investing in a qualified plan is similar to investing in a mutual fund. The account is managed by a financial investment professional and may not be directly managed by the participant. Although there are many fund plans to choose from, you are also prohibited from leaving asset allocation group and switching to another within a 12 month period.
