5 Reasons to Start a 529 Plan on 5/29
529 plans can be a great savings vehicle for future educational expenses while offering tax advantages.
College can be expensive. Americans are setting records for levels of student loan borrowing. A great way to help kids get through school with less needs to borrow is 529 Plans.
A 529 plan is a way to pay for future educational expenses that comes with tax advantages. While the money that you contribute does not reduce your taxes, the money you earn grows tax free when used for qualifying education expenses.
Here are 5 reasons 529 plans are a great idea:
1. Pre-college education
New for this year, 529 plans can be used to pay for tuition at private, public, or religious K-12 schools. What if you planned for your child to attend secondary school in five years and you think tuition will be $10,000? If you invested $7,000 in a 529 plan and it earned an 8% average annual return for five years, you would have around $10,000 – that’s about a 30% savings for tuition. While earning on 529 plan investments can’t be guaranteed, such a rate of return is a real possibility.
2. Investment-level returns
When you save money in a savings account or CD, you get a safe, guaranteed return, although it doesn’t offer the same chance for high returns that are possible with money invested in mutual funds. But 529 plans give you that option. Yes, these type of investments sometimes go down in value, but, generally speaking, investments of five or more years regularly see annual average returns of 6%, 8%, or perhaps even 10% or more.
3. Low fees
Many investment choices come with hefty fees that put a dent in your earning power up front. Thankfully, most 529 plans focus on providing a product with low fees, so that most of your account can grow for your child’s education needs.
4. Relatives can contribute
Your child may have an interested relative such as a grandparent or aunt who would to support his or her education. Anyone can contribute to a child’s 529 plan.
5. Flexible post-high school usage
It’s hard to say what career yournine-year-old may have when she or he grows up. Some kids decide that college isn’t for them. With a 529 plan, you have the flexibility to use it for non-traditional schools like a tech or trade school, or even cooking school.
There are dozens of 529 plans to pick from and not all of them give users the same results. Fortunately for those in the Intermountain area, one of the most highly rated plans is Utah’s My529 (previously known as UESP). My529 is regularly ranked as one of the best programs in the country.
Education will make an important contribution to the well-being of your children in adulthood. A 529 plan can make it easier for that education to happen.