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Amanda LaConte is a former banking professional and has recently transitioned to being a stay at home mom. This is becoming very exclusive so that soon only the rich wil be able to send their kids to university.  Is is any coincidence the likes of Gates, Zuckerberg, Brin, Page had well funded parents? 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. Different states provide various incentives such as tax enticements, grants, and scholarships, for utilizing their plans. Prepaid tuition plans – Allows you to buy credits for college at today’s price to be used when your child goes to college.
College savings plans – Allows you to contribute money into an account that is invested in mutual funds.
Nearly half of 529 plans are bought through a broker, which results in extra fees to open an account and contribute.
Roth IRAs are special because they take post-tax dollars, allow you to save and invest, and then pull the money out at some point in the future, tax-free. 529 plans, named for a tax code section, were started several years ago as state prepaid tuition plans. Money in a 529 savings plan is invested in professionally managed accounts and these account values can fluctuate with the market. Anyone can make a contribution to a 529 on behalf of someone else, from a grandmother to a rich uncle.
Under the basic "gifting" rules of the Tax Code, an individual can give up to $11,000 apiece (a married couple can give $11,000 each for a total of $22,000 per child) to as many individuals you want without triggering the gift tax.
Tax-free earnings growth: There is no federal income tax due on any earnings while they are in your account. Low minimum investments: Because you can open an account with virtually any amount, it's easy to start saving today. Investment choice: You choose from various investment options within each state's 529 plan. Control: The donor controls the account as owner and can change the beneficiary at any time.



Is a 529 savings plan a better alternative for you than a Coverdell Savings Account or setting up an UGMA or UTMA trust? If funding for higher education is one of your major goals, then clearly, you should consider using a 529 plan, as this an extremely effective and efficient college funding vehicle.
Almost $122 billion of financial aid was distributed during the 2003-04 school year, with an average award of $10,472 per full-time student.
Once your child starts college, you'll want to use funds set aside for college to maximize tax advantages as well as your financial aid awards.
Her educational background is in business and finance and worked for twelve years in the financial industry before becoming a full time career mom. For example, in Pennsylvania contributions to a 529 plan can be deducted for state purposes. You can start out aggressive when they are young and switch to more conservative later as they get older. For example, Vanguard offers the Vanguard 529 plan and Fidelity offers the UNIQUE College Investment plan.
Most plans have strict regulations and perform well, but you should always double check the performance and ensure that it’s invested in accordance to your risk tolerances. There are several ways to do this, which will not only give them the beginnings of a good future, but also reduce your own taxes! Any investment advisor will tell you that time is your friend and that it’s important to save early. This is a great college savings tool because many states allow you to deduct a portion of your contributions to these accounts from your taxable income. To help keep costs down and avoid conflicts, you may want to develop a budget to guide your child's spending. For the 2004-05 school year, the average annual cost of a four-year public university is $14,640 and for a four-year private university is $30,295 (Source: Trends in College Pricing, 2004).
It’s important that we take advantage of plans like this to get the most for our money!
New Jersey offers a one-time scholarship of $1,500 to attend one of their state universities.


In addition, as long as the money is used for qualified college expenses, all the earnings are tax-free when withdrawn.
In Ohio, the College Advantage 529 permits taxpayers to deduct contributions from their Ohio taxable income. This is a win-win situation because the business gets a deduction for the wages paid and depending on the salary, your child will pay little to nothing in taxes on that income! When you start a Roth for your child, you are able to take advantage of their extremely low effective tax rates and save those post-tax dollars on which they are paying essentially nothing in tax. In addition, each contributor can deduct up to $2,000 per beneficiary, per calendar year, with unlimited carry forward.
In the example of employing your child, doing this and starting a Roth is incredible because the wages that they are being paid are not only (essentially) tax-free when they are earned but they and all their future earnings are sheltered from tax inside of the Roth. With several decades of compound interest, this adds up the thousands upon thousands of dollars in tax savings. Beneficiaries You can designate anyone as beneficiary of a 529 plan, regardless of their relationship to the account owner.  You can even designate yourself as a beneficiary!  The only requirement is that the beneficiary be a US citizen or resident alien and that they have a social security number or federal tax ID.
If the beneficiary of a savings plan doesn’t end up going to college or receives a scholarship, you can change the beneficiary to a family member of the beneficiary, leave the savings in the account to continue to grow, or take a non-qualified distribution (earnings are then subject to taxation as well as a 10% penalty).  For prepaid plans, refund and transfer options are typically available but vary by plan.
Qualified distributions fall into the following categories: Tuition, fees, books, supplies and equipment required for enrollment or attendance of a designated beneficiary at an eligible educational institution.
Other Interesting Points The assets in the account are not considered part of the donor’s estate so it is also a great estate planning tool! Funds from one 529 plan can be rolled over into a different 529 plan one time per 12 month period.



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