Saving for College: The Benefits of 529 Plans

I've noted before that I'm in the midst of working through our college costs -- estimating what we'll need and how we should save it. 529s are one option we're considering as a college savings vehicle and it's likely we'll jump into one before the end of the year.

There are several advantages to saving for college with 529 plans. Here's a list of them from Money Central:

When high costs are avoided, 529 plans are outstanding. What makes them so good is their tax benefits -- which means that if you are in a low tax bracket you benefit less, and are more likely to qualify for financial aid, as well. Those benefits, in addition to possible deductibility on your state (but not federal) tax return, include:

• No tax on contributions if they fall below the federal guidelines of $55,000 in five years ($110,000 for a couple).

• No tax on investment returns.

• No tax on withdrawals, assuming the beneficiary uses the money for post-secondary education.

• Best of all, you retain full ownership of the account, so that if little Johnny turns out to be a drug dealer, you can switch beneficiaries to a more worthy individual, including yourself.

I've still got some more research to do before I take the plunge into 529s, but the more I get to know about them, the better they seem. I'll keep you posted as I go through this process.

For more college-related posts, see these links:

• Free Money Finance Guide to College Success

• Make the Most of a College Education -- It's Well Worth the Investment

• Why Education is So Important to Your Financial Future -- And How You Can Pay for College

Comments

[Frugal Momma]

I have 529s for all 3 of my boys. I think that they are well worth it.