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Sending Junior to college

Does your college savings plan measure up?

Legacy transition plans often take place right around the time you’re sending the next generation away to college. Be sure your college savings plan measures up.

As with any tool, there are good choices, better choices and rotten choices in college savings 529 plans. So, it pays to look critically at any plans you are thinking about using.

First, what is a college savings 529 plan?

A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.

Savings in 529 plans grow tax deferred and all growth can be removed for qualified educational expenses without income tax. If you are in a high tax bracket the value of a 529 plan goes up.

Some states offer tax benefits for their state-sponsored 529 plans. See if your state offers savings here.

There are two kinds of 529 plans:

-529 savings plan where you invest money and it grows for use later on educational expenses; or

-529 prepaid tuition plan where you pre-pay all or part of the tuition for your state public college in advance. This allows you to buy the tuition at today’s rates and use the education later when the tuition may well be higher.

You can invest in a 529 two ways:

-Direct with the 529 sponsor often with only a website, or 800 number for assistance.

-Through a financial professional who will provide advice about 529 products and charge a fee either through sales charges and commissions or through a direct advisory fee.

To determine if you are using a good 529 you should:

-Check Morningstar Inc’s ratings of the top 529 providers here.

-Consult this list to see how the long-term performance compares to peers.

-Review the program guidelines to see what investment options are available within the plan.

-Review the fund fees and expenses to see what it will cost you to own the account.

The most important thing about saving to fund college costs is, to START. Saving every month for future college is a great strategy to accumulate funds for this important goal. It’s not nearly as important where you send the money. Get started saving today and when you have $20,000 put away for college, meet with your fee-only financial planner to talk about the smartest thing to do next.

If this blog has got you thinking about your own situation, get in touch with my office (

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.

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