Next to saving for retirement, your biggest financial challenge is probably saving for your kids' college education. How do know how much to save? How much will a college education cost when Junior turns 18? What if you save all of this money and then he decides to tour Europe instead of going to college? Can you cash in the account and take that dream vacation you and your spouse have been thinking about? That depends on how and where you've stashed the money. Back before the days of Education IRAs (now called Coverdell Education Savings Accounts), there just weren't that many ways to save for your children's education -- at least not where you could get any kind of tax break.
Now, in addition to the Coverdell Education Savings Account, there is another way to save that can provide even better benefits. A 529 college savings plan is a very simple way to save money for your kids' (or anyone else's) college education. The benefits are tremendous. Here are some of the heavy hitters:
And there are still more benefits.
- You pay no taxes on the account's earnings.
- The child doesn't have control of or access to the account -- you do.
- If the child doesn't want to go to college, you can roll the account over to another family member.
- Anyone can contribute to the account.
- There are no income limitations that might make you ineligible for an account.
- Most states have no age limit for when the money has to be used.
- If the child gets a scholarship, any unused money can be withdrawn without paying any penalty (just the tax).
In this article, we'll look at the newly revised rules for 529 Qualified State Tuition Plans. We'll explore the difference between this new savings vehicle and some of the other traditional education savings methods and see why this new plan is the best yet!