At Alpha Omega Wealth, we don’t focus private wealth management strategies for the far-away day of retirement. We make strategies for you to enjoy your wealth now. One way to get ahead and avoid you or your children slaving over debt is to have a college savings plan.
What is a 529 College Savings Plan?
Legally known as Qualified Tuition Plans, 529 college savings plans are sponsored by states, state agencies, or educational institutions. It gets its nickname from Section 529 of the Internal Revenue Code which is what authorizes the plans.
Two Types of Plans
529 plans are in the form of either prepaid tuition plans and college savings plans. All states and Washington D.C. sponsor at least one type of the plan. Private colleges may sponsor prepaid tuition plans within states that only sponsor the college savings type of plan.
Prepaid tuition plan
The prepaid tuition plan option allows you to purchase credits at participating universities for the future. Purchasers can then lock in tuition prices at the rate at the time of the purchase, no matter the cost when you actually attend classes.
Some universities allow room and board to be purchased as well, but most plans only include tuition and mandatory fees. Many prepaid tuition plans can be guaranteed by the state of which the owner or beneficiary is a resident.
College savings plan
College savings plans allow a saver to create an account for a student in order to pay their college expenses. The saver may choose from several investment options for contributions including stock mutual funds, bond mutual funds, and money marketing funds.
These plans cannot lock in tuition rates and they are not guaranteed by the state they are purchased in or applied to. However, they allow the student to apply the money to non-tuition needs like room and board or books.
Is a 529 College Savings Plan Right for You?
If you aren’t completely sure you want to attend higher education, a 529 college savings plan may not be for you. You can face penalties or lose benefits if you don’t use the money you’ve put in a 529 account for college expenses.
Once you’re sure you want to save for college, a 529 savings plan is a great option, but be sure it is the best option for you or your child by contacting Alpha Omega Wealth. We want you to manage your private wealth in the most intelligent ways available.