What is National 529 Day? A day that serves to raise awareness of the benefits of having a college tuition fund for your child’s education. 529 plans are named after section 529 of the Internal Revenue Code 26 U.S.C. § 529. A 529 plan is a college tuition plan for your children that is tax-free and not subject to any federal capital gains tax. Why should you care? According to CNBC, 68% of Americans are not sure of what a 529 plan is and as a result new parents wait too long to open one. The plans are available to everyone as in there are no income limitations. There are many choices since all states and the District of Columbia offer at least one 529 plan, as well as some states offer a tax deduction to those who use their state’s plan.Getting started can be confusing if you are first starting out. So here are a few things to consider when comparing plans:
Fee: Not all 529 plans are the same. Some may have more fee, while others may have a different fee structure.
Automatic savings: Always a good option to set up automatic savings.
Ways to monitor performance: Although it may be tempting to set up a plan and forget about it until you need it, it may be too late if the plan didn’t perform according to your expectations. Before you lock your money into a 529 plan, know the ways in which you will be able to monitor and maximize fund’s performance.
Additional benefits: Some plans especially state plans may offer additional benefits like matching contribution or tax deductions. Some of these options might be worth exploring.
Ease of making changes to the plan: As with any investment, find out process of withdrawing the money, changing beneficiaries and how it may affect your eligibility for federal financial aid.
As always, it’s recommended that you contact a financial adviser or planner to help you pick out the best investment strategy for your needs.