Guide to College Savings Accounts and the Different Types
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What Is a College Savings Account?
6 Types of College Savings Accounts
Coverdell Education Savings Accounts (ESA)
UTMA or Custodial Accounts
Traditional Savings Accounts
What Is Generally Considered to Be the Best Type of Savings Account for College?
How Does a 529 Plan Work?
Types of 529 Plans
Education Savings Plans
Prepaid Tuition Plans
Factors to Consider Before Opting for 529 Plans
Benefits of 529 Plans
Grows tax-free Withdrawals are tax-free if used for qualified education expenses No annual contribution limit High total contribution limit (ranging from $235,000 to $550,000, depending on the state) Considered a parent’s asset, which may be helpful when a student is applying for financial aid Contributions up to $17,000 per year per parent will qualify for the annual gift tax exclusion.
Steps for Opening a 529 Plan
Research plans All states, along with many brokerage firms, offer 529 plans, so it can be worth shopping around. You might start by looking at your own state (some states will offer a tax deduction for 529 contributions, but not all), then expand your search to other 529 plans looking carefully at past performance and fees. Open the account Typically, you can open a 529 plan online. To complete the application, you’ll need to choose a beneficiary (likely your child) and have their date of birth and Social Security number. You’ll also need to provide information about yourself. Choose your investments Once you pick a 529 plan, you may have a choice of investment options. Some plans offer both age-based target-date funds, as well as individual portfolios options. Fund your 529 You can make your first deposit by transferring money from your checking or savings account. You may then choose to set up a recurring transfer of a certain amount per month so you won’t have to remember to contribute to your 529. Or, you may be able to have a portion of each paycheck direct deposited into the account.
How Scholarships Affect 529 Plans
Tools for Planning College Funds
Age Groups Eligible for College Funds
When to Establish College Funds
Frequently Asked Questions
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