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529 plans are ripe for the saving – yet few pick them

College may be expensive, but it doesn’t have to break the bank if you plan ahead and start saving now.

College may be expensive, but it doesn’t have to break the bank if you plan ahead and start saving now.

Section 529 plans are the best way to save for college, yet hardly anyone has one.

There are countless formulas to calculate the estimated amount needed for post-secondary education, but the best advice is to contribute what you can comfortably afford. If you or a relative wait until you can contribute the amount possibly needed, you likely will never contribute anything.

In most cases, it’s best to put something into a 529 savings plan every month; you can always take it back in an emergency. It is better to contribute what you can comfortably afford than nothing at all.

Some reasons as to why a 529 plan is something you should consider:

A 529 plan is a tax-advantaged plan that allows the plan sponsor (donor) to contribute toward a beneficiary’s post-secondary education expenses. The funds earn income exempt from federal and usually state taxes, if used for post-secondary education, to make it easier to save for college or other post-secondary training.

A 529 plan may be offered by a state (you don’t have to choose a plan where you live) or college (allows the purchaser to purchase tuition credits usually at a discount).

There are two types of plans, prepaid tuition plans and savings plans. States are permitted to offer both types; an education institution can only offer a prepaid tuition plan.

Qualified higher educational expenses include tuition, fees, books, supplies, special-needs services and room and board for a student attending any accredited college, university or vocational school and at some foreign universities. The beneficiary must be enrolled at least half-time.

An eligible educational institution is generally any college, university, vocational school or other post-secondary educational institution eligible to participate in the student aid program administered by the U.S. Department of Education.

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