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Saving for college can be a daunting challenge for many families. A 529 plan can make
funding a college education easier. Any money withdrawn from the account that is used for qualified education expenses is free from any federal income tax. As an investor, you can invest in a 529 plan from any state but there may be additional tax benefits or other advantages if you invest in your state’s program. The child that you designate as the beneficiary of the account does not have to attend a college in the state that originated the account.
There are two different types of 529 plans and the plan for each state varies. The prepaid tuition plan allows the pre-purchase of units or credits at participating colleges and universities for future tuition, and in some cases, room and board. College savings plans primarily consist of mutual funds and often include age-based investment options which become more conservative as the child gets closer to college age. The investment professionals at Savage & Associates can help you to figure out which will work best for you and your family.
529 Plans are sponsored by states, state agencies and educational institutions. There are generally no guarantees by the issuing municipality, government agency or educational institution. There may be tax benefits and other advantages to plans offered by your resident state. You should consider the potential benefits (if any) offered to residents by your own state's plan (if available) prior to considering another state's plan. The availability of tax or other benefits may be conditioned on meeting certain requirements such as residency, purpose for or timing of distributions. or other factors. With very few exceptions, if withdrawals are made from a 529 Plan for purposes other than education, they are considered non-qualified withdrawals and they are subject to federal - and possibly state - tax penalties.
Specifically, the earning portion of the non-qualified withdrawal will be included in the
recipient's gross income for federal tax purposes, the earnings will be subject to 10%
federal tax adviser. Information herein is not intended to be tax, legal or investment
advice. Please consult a qualified professional and review the program prospectus or
offering statement before investing. Please also note that assets in a 529 Plan could
impact the beneficiary's ability to qualify for grants and student loans. Annual asset
charges for a 529 plan may be higher than corresponding share classes of underlying
mutual funds.
Before investing, carefully consider the investment objectives, risks, charges and
expenses of the mutual funds as well as their investment options. This and other
information is contained in the prospectus, which you should read carefully before
investing. Prospectuses are available from your registered representative. Mutual
Funds are subject to market risk. Your principal value may decline.
Call 419-475-8665 or fill out our on-line request form for more information or to schedule an exploratory appointment with our experienced professionals at Savage & Associates.
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