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529 Savings Plans

             529 plans are state sponsored, federal government supported, investments plans that encourage saving money for the purpose of higher education. In today's job market it is crucial to have a college degree, however, the cost of education continues to increases. These plans allow individuals an opportunity to begin preparing for educational cost he/she may not incur until many years later.
             1. General Description of Tax- Deferred Vehicle.
             A tax deferred investment is one in which some or all taxes are paid at a future date, as opposed to the year the investment produces income. Tax-deferred vehicles typically refer to accounts that allow deferral of taxes on contributions, growth, or both; taxes are not paid until withdrawal of funds. The growth of funds in a 529 plan and withdrawals made for the purpose of education are tax-free at the federal level. The taxation at the state level varies state to state. .
             2. What person can utilize this vehicle of plan?.
             There are two types of 529 plans: prepaid tuition plans and college savings plans. Prepaid tuition plans allow parents to prepay future tuition and fees at today's cost. College savings plans allow parents to begin saving for higher education expenses for any eligible institution. .
             Generally either of these accounts can be opened by anyone for the benefit of any eligible beneficiary. For example, a grandparent may open an account on behalf of a grandchild. A non-related person may also open an account on behalf someone. Most commonly, these accounts are opened by parents or grandparents for the benefit of their child or grandchild (Saving for Education).
             3. Where is this plan most commonly seen, and why?.
             All states offer either a college savings plan, a tuition prepayment plan, or both. The plan specifics very widely by each state. 529 plans are most commonly used by middle and upper-income families. Lower income families often do not have the disposable income to save, whether it is for their children's college education or their own retirement.

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