Next to saving for retirement, funding your children’s education may be the biggest financial challenge you face. The cost for higher-education can be daunting. With the advent of 529 college savings plans in 1996, a new alternative to traditional methods of saving for college was available.
If current trends continue, it has been estimated that the cost for four years at a private college in 2026 could exceed $300,000. And cost at a public college could reach $140,000 or more. (See Footnote 1)
529 plans offer a variety of benefits for both the contributors and their beneficiaries.
- Federal tax deferred growth
- Federal tax-free qualified distributions.
- Flexibility in terms of contributions, distributions and how and where savings are used.
- Federal gift and estate tax benefits
- Control, unlike some traditional methods, the account owner in most instances retains complete control over the account.
- Transparency, you know what funds are in your account.
There may be other benefits that the 529 plan you select may offer. 529 plans are sponsored by states. If you live in the state which sponsors the plan you’re participating in there may be other state tax benefits. The number of features can vary widely between state 529 plans. It is important to discuss the differences with your advisor when evaluating different plans.
To learn more please contact CMA and request more information on 529 College Savings Plans.
[sharethis]
FOOTNOTES
1. The College Board, Trends in College Pricing 2007