5 Basic Rules In Getting 529 AccountsInvesting in their children’s education is always a top priority among parents, and their main problem stems from trying to come up with the required money needed to pay for their child’s eventual college fees. A 529 plan may very well be their answer. There are only 5 basic rules in getting 529 accounts, all easy to meet: 1. Deciding the type of plan. 529 plans are college education fund plans offered by almost all states in the US, to help families plan for their child’s education by saving up on money to be used for college expenses in the future. These plans are named for Section 529 of the Internal Revenue Code, and are available in two packages: savings, or prepaid plans. A 529 college savings plan is based on market investments made with the money, mostly mutual funds, and can be either age-based (which is a more conservative approach) or risk-based (where chances of earning more from the investments are increased, though not as safe). Prepaid plans allow parents to pay the cost of existing college fees, rather than the tuition costs of when the beneficiary is already in college. It is advisable to know more regarding prepaid and savings plans, and decide which you prefer. 2. Know the penalties. According to federal law, a 10% tax will be imposed on savings plan that benefit those who are not qualified for the 529 plan. Generally, family members, including those legally adopted, are allowed, so sponsoring a non-family member will be subject to these fees, and there is no age or wage restriction; anyone can avail of this plan as long as they follow the guidelines mentioned. It is always good to read through every 529 plan being offered in your state to understand what you’re investing in. 3. Familiarize yourself with investment options. Many 529 plans offer different options from fixed income and stable value funds to 100% equity funds, to protected options. Try to figure out which option appeals to you best and whether that is available in the 529 plan being offered by the state you reside in. Parents can also opt to transfer a savings account from one state to another once every 12 month period. 4. Consult an advisor. When in doubt, the most prudent option is always to seek the aid of a financial advisor, who can help you prepare the best suited plan for your child and family. Don’t be afraid to ask for a second or third opinion especially in areas where you do not fully comprehend the details being provided for. It is a good idea to compare the different plans available with someone with experience in the matter, and decide on the best course. 5. Contacting your state. Now that you have finally decided on a savings or prepaid plan, then the next step is to figure out how to enroll in the 529 plans. Many options for enrollment have been made available online, complete with comprehensive email information for those asking for a summary of all plans. Program materials and enrollment forms can be applied for online as well, but those interested should always take the time to read all program disclosures to prevent misunderstanding. Money may be no object to many parents when it is their children’s educational future in question. But why spend too much money when there are other cost-effective and more affordable methods such as the 529 plans, to secure good college tuition? |