Wednesday, June 6, 2012

5 Reasons to Invest in a 529 Plan

 (Photo credit: Wikipedia)
According to a recent survey 50% of American families do not have a monthly budget, save for retirement or college expenses. The lack of personal finance knowledge in America is a major problem. A new survey by brokerage firm Edward Jones claims that 62% of these households never heard of a college savings 529 plan.

The 529 plan is the best way to save for a child's education. It's the primary way to accumulate a nice tax-free investment account for your child's education. 

According to the Edward Jones survey, the number of people who understand what a 529 plan is rises with a family's income. Only 27% of those surveyed who make less than $35,000 a year knew was a 529 plan was versus 57% for those making between $75,000 and $100,000. And 62% of respondents earning more than $100,000 a year were familiar with 529s.

5 Reasons to Invest in a 529 Plan

1. When you invest in a 529 plan, it's safe from federal income taxes and almost always state taxes as well. As long as the cash remains inside the account no taxes are generated.

2. You can take out money for qualified college expenses such as tuition and room/board without paying taxes.

3. The states offer their own 529 plans and about three dozen of them offer residents some sort of tax deduction for their contributions. Consequently, you should look first at your own state plan if your state offers a tax benefit. If the state plan is weak, look elsewhere. 

4. For competitive reasons, the costs of 529 plans have been dropping, which is great for investors. When evaluating plans, make sure you look at what the built-in cost of these plans will cost you because you won't be getting an invoice. The fees are withdrawn automatically.

5. These college savings plans routinely include age-based investment options. Age-based investing is easy because the accounts automatically grow more conservative as the children near their college years. 

Enhanced by Zemanta

1 comment:

  1. Yes, it's true- lack of financial education on personal level is a big problem in most households. This is an issue that should be addressed by the government on a large scale. Currently there are only 15 states teaching finance related courses in high school. No wonder there's a lot of problematic cases when it comes to student loans.

    Best regards,


Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics