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Take advantage of 529 plans to save for college

College fund savings

College fund savings

I was surprised to learn that most people aren't aware of a college savings vehicle called a 529 plan. The financial firm Edward Jones surveyed Americans to see what they know about the plans, named after Section 529 of the Internal Revenue Code. Only 37 percent answered correctly.

The advantage to the 529 plans is that its earnings are not taxed if the funds are used to pay for qualified college expenses. In most cases, earnings are also free from state and local taxes. There are no income limitations on who can contribute to an account. And I particularly like this feature — the account owner controls the money.

A prepaid tuition plan allows you to pay a child's tuition in advance. The point is to lock in for tomorrow at today's rate. However, be careful about funding a prepaid plan and thinking you are done. It covers only tuition and sometimes, fees. What if your child wants or needs to live on campus? Room and board alone can be as much as tuition.

Florida's prepaid program offers dormitory plans as well. Information on the prepaid program as well as the state's 529 plan is available at

In the 529 savings plan, you invest much as you would in a workplace 401(k). This means your returns are based on how your portfolio performs throughout the years. Most 529 savings plans offer age-based options in which the investments become more conservative as the beneficiary gets closer to college age.

All 50 states and the District of Columbia offer at least one 529 plan. Although the 529s are state-sponsored, you can invest in any of them regardless of where you live.

Start your research about 529 plans by going to the one run by your state. Check out and, which is run by the College Savings Plans Network.

Take advantage of 529 plans to save for college 06/01/14 [Last modified: Sunday, June 1, 2014 8:31pm]
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