529 Savings Account

What is the 529 Plan?

The 529 plan is qualified tuition plan that provides and incentive for you to start saving early for a beneficiary of your choice of college tuition down the road. It was created in 1996 under the Small Business Job Protection Act and has a lot of benefits to it. There are a lot of ways to save for college but this is just one way to do it and I am happy to be here today to share that information with you.

What are the different types of 529 Plans?

What you’re going to see is two different types of 529 plans. One is called a pre-paid tuition plan and the other is called the college savings plan. In either scenario, any of the earnings that you use to save for a college educational purposes are going to be used for tax free (federally tax free) with no penalties whatsoever. That’s the number one benefit of going with a 529 plan. The difference between the two that I just mentioned is typically a pre-paid tuition plan is where you purchase units to lock in specific tuition rates at specific educational institutions. What they will do is they will take the age of the beneficiary, the number of years you may think that beneficiary may be in college and what tuition rates may look like in the future and lock in a payment plan for you to make contributions for that plan. With the college savings plans, you are responsible for contributions on behalf of the beneficiary. Typically what we will find are mutual funds and annuities to help you grow some assets to meet those needs. So you’re really not locking in future tuition rates, but you’re putting in contributions every year to hopefully see some growth in these mutual funds and annuities to be able to pay off their qualified expense needs.


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