• What is a 529 savings plan?
A 529 savings plan is an investment that is used specifically to pay tuition fees. These plans are managed by the state or a university. Those in charge of a particular university are determined to use for your child to attend university, in other words, you choose the college to visit her son, even before you begin to save for their education. 529 plans are usually certain universities as "prepaid". In addition, each state has a 529 plan, which can pay for all eligible educational institution.
• What are the advantages of using a 529 savings plan?
As a 401 (k), there are tax incentives to save money in a 529 plan. While you will be taxed at the regular part of their future earnings in the plan, no federal tax on money from the plan to pay for college withdrawn. The tax benefits vary from state to state, but they do not offer the same types of incentives such as federal taxes on 529 plans.
These plans are also useful because, once you have completed the first documentation of the maintenance plan is very hands-free. The money earns interest that is a part of your child's education, and not always manages the investment.
If you are concerned that your child has access to financial resources, and use the money for eligible expenses, do not worry. Money in 529 economies cannot be taken from you is your child not to pension funds in the account.
• What are the disadvantages of using a 529-linked plan?
The biggest downside to a 529 plan is that it's lucrative investment in the market, with only a 529 plan, the potential interest in this area boundaries can be accessed.
Another reason why you want to explore other options may be admitted because the funds can be used in the plan 529 for college expenses. If used for other purposes, the money is deducted from the account of a federal tax of 10%.