A 529 plan can be a great help to assist parents in saving for their child’s college education. You should pay close attention to several factors, especially any associated fees and taxes.
One of the best benefits of 529 plans is that they are exempt from federal taxes. However, at the state level, taxes vary. Many people are being lured into investing in 529 plans outside of their home states and as a result are losing tax advantages by choosing these plans.
If your advisor recommends an out-of-state plan, be sure to ask why. Ask what if any, tax benefits you may lose by making an investment in that plan. If you have invested in an out-of-state plan already and see that you are losing tax benefits, you can roll over your account to a new plan.
You may have to pay fees and you may even end up owing taxes if you transfer your money to another state’s program, so be sure to find out all of the details before rolling over your account to another plan.
529 plans can be a bit confusing, so if you are finding it difficult to decide which plan to go with, then by all means seek assistance. 529 plans are a wonderful resource as long as you are aware of all of the laws and regulations surrounding them.
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