Choosing the Right Plan
Choosing the right 529 plan is no harder than choosing anything else in the financial world. If you do your research, you can find the right plan for your family. Here are few guidelines to get you started:
Look at your own state’s plan. Plenty of states offer a tax deduction on 529 contributions, and many also exempt state tax on the earnings upon withdrawal. Finding a low cost plan means looking at several possible charges. Class A shares have upfront costs and tend to have lower annual costs. A few state programs require your child to use the money prior to a certain age, or require that the child be under a certain age in order for you to be able to open an account. Although the IRS set a 10 percent fine for withdrawal of funds that aren’t used for qualified education expenses, plans can charge more than that. Also find out about how easy it is to get your money in the event of an emergency. Sometimes, there are time requirements about how long the money has to stay in the account before it can be withdrawn. If you do have to withdraw a portion of the money for a non education expense, find out what happens to the rest of the account. Is it closed? Is a fine charged for the entire amount?Look at the maximums and minimums for contributions. Determine how much you want to have in the account when your child enters college. Make sure the plan allows at least that amount.