If you’re planning for college, or are looking to set aside money for future college expenses, you’ve probably heard the term “529 plan” thrown around quite a bit. But what exactly are they? Keep reading to learn more about them, and how they can help you plan and pay for college.
What is a 529 plan?
A 529 plan is a tax advantage savings plan that helps for future education costs. It allows you to set aside money that is designated or earmarked just for educational expenses and is authorized by section 529 of the Internal Revenue code.
The 529 plan is a plan that should be used before someone is ready to go to college. You should look into this if you are the parent of a future college student or if you are thinking about returning to school at a later date. This ensures that the money will be there when you are ready and will not be used for anything else.
It is mainly intended for parents or grandparents to use in anticipation of sending their child, grandchild, or another young person to college. It allows you to set aside money that is to be used explicitly for attending college, and some even start putting money into it as early as birth.
The IRS allows you to avoid paying taxes on this money so that you can shelter it from taxation while saving the money for one particular purpose – sending your young person to college.
With a dedicated savings plan that focuses only on saving money for college, you can avoid the stress of not having money put away when college is around the corner. It may also keep you from dipping into your regular savings or investment plans, so that you can keep that money separate from your college fund.
Want to learn more? Check out more about 529 plans on the IRS’ website.