A 529 plan is a savings and investment opportunity for future or higher education. A 529 plan can be used to fund one’s self or any eligible member of the family. There are many people who are looking for the best 529 plans that are available. However, there may be no ‘best 529 plans’ as such; rather the individual should choose the best options according to the requirement. What one person may consider as the ‘best’ may not be the ‘best plan’ for another person necessarily.
Finding the Best 529 Plans
Trying to find the best 529 plans may lead people on a ‘wild goose chase’. The important thing while investing for future studies is to keep in mind the requirements and the fee that would have to be paid towards this education. Almost all the states in the United States offer a 529 savings plan to its residents.
Seeking investment advice may be one of the keys to finding the best suited 529 plan for an individual. The needs of the individual determine how well a plan will suit the person. There are many aspects of the 529 plan that need to be considered. The primary aspects are, however, 529 plan rules. The rules of the 529 plan generally deal with aspects such as the 529 contribution limits, withdrawal procedures and also annual incomes and taxes.
Contribution Amounts and Limits
The amount of contribution greatly varies on the requirement of the individual. For example, if the education expense is estimated to be high, then a higher contribution amount would be necessary. There are, however, rules that govern the contribution amount of 529 plans. Most of these limits are set by the state governments. These rules and limits must be carefully evaluated before committing to a 529 college savings plan.
For example, if the annual contribution that is acceptable for a 529 plan is $1500 and you (or your children) are already in college, it wouldn’t make sense to opt for this plan as it will not be beneficial to you or your children. In the same way, if the college expense is expected to be a certain amount and the total contribution limit is lesser than the total college expense, then it would not make sense to select that plan either.
529 Tax Deductions
For many people, the 529 plan looks very attractive just because of the tax-deferred money growth and the deductions that are available on the income tax. If a 529 plan is purchased from the state of residence then the individual gets 529 tax deductions on the income tax up to the amount of the contribution. Some states allow the deduction of the full amount of the contribution while other states allow a partial deduction. There are also instances where the state does not offer a tax break. In these cases, it is best to invest in a 529 plan that has the lowest fees in order to benefit from the investment. In any case, the money in the account will continue to grow tax-deferred.