Benefits of a 529 Savings Plan?

If you are unaware, a 529 savings plan is a plan set up to invest money that will be used for college in the future. A 529 savings plan has several benefits. Perhaps the most well known reasons are the fact that they are considered to be tax-deferred earnings, and the distributions are tax-free as well. In addition to this, there are other reasons that a 520 savings plan is a good idea.

First of all, there is a myth that you need to have a lot of money in order to open up a 529 savings plan. This is not true. No matter what your income, it is possible for you to open up one of these plans. In fact, there are many of these types of plans that can be opened up for only twenty five dollars. Most of the plans do not require you to make minimum monthly payments either. It is possible to set one up so that money is automatically taken out of your paycheck, but even if you choose this option there is not requirement that the deductions be large. The balance of the plan will continue to gain interest and will be just as useful if you can’t make contributions to it every month, or even if you stop making payments entirely.

Another Excellent advantage of 529 savings plans is the fact that there is no required enrollment period. In other Words, you can set up a plan no matter what time of year it is. This is wonderful news for anybody who knows anything about investment, because even just a few more months of investment period can add quite a bit to the total investment. Some of the plans will only allow you to change your investment options during certain times of year. If you are making low risk investments, this shouldn’t be an issue, but if you are more prone to invest in volatile markets you may want to find a plan that is more liquid.

Another great thing about these plans is that it is fairly easy to withdraw money from the account, even if the money is not to be used for college expenses. You will only be taxed ten percent by the federal government if you need to make a withdrawal, and the taxes will only apply to your profit. The same is true for the standard income tax that will also apply.