Monday, Oct. 26, 2009

Open a 529 College Savings Plan

This can wait until you have a child. But with college costs rising faster than inflation and likely to stay on that track, you cannot get started too early. Conservative estimates put the four-year cost of a public university 15 years from now at $100,000. Thankfully, 529 plans are a great way to start saving for this expense today. These are state sponsored tax-advantaged plans that allow you to set aside money for any educational expense, including room and board and even school supplies like a new computer. All states have a 529 plan, and their tax benefits vary. But key to them all is that you pay no federal tax on the account's earnings and in some states your contributions are tax deductible. You can save in another state's plan and spend the money in any state you choose. Some of the features that make these plans so attractive: You (not your child) keep control of the account no matter your child's age; if your child doesn't want to go to college you can roll the account over to another family member; anyone can contribute to the account and there are no income limits that might make you ineligible; most states have no age limit for when the money has to be used; and if your child gets a scholarship any unused money can be withdrawn without penalty. To get started, go to


Planning For Retirement: Your 30s

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