529 College Savings Plans

Making Comparisons Between Different 529 Savings Plans

In this article I'm going to give you a 529 plan comparison. First, there are actually four different types of 529 plans. There's the:

1. Direct-sold Savings Plans. This is where investors purchase directly from the plan manager. In this case, you'll have to rely on your own research to identify best options (thus the reason I gave you lots of tips on how to use Google to find exactly what you wanted), or you can always hire a fee-based financial planner to do that for you. Since plans like these are monitored and OK'd by the individual states, they're managed by professional investment firms; there are no sales charged with a plan like this.

2. Broker Sold 529 Savings Programs. A 529 plan comparison wouldn't be complete without adding these plans. These 529 plans are sold through financial advisers. If you use an advisor, you'll obtain the benefit of having advice and an investment professional's expertise; however, just as when you hire your own lawyer, it'll mean that you have to play sales charges or incur other fees, so the adviser can be compensated.

3. Prepaid 529 Plans. In this 529 plan comparison, a Prepaid Contract allows you to buy a contract which will cover between 1 and 5 years of tuition. It will either be contributed to via an installment plan, or as a lump sum.

4. Prepaid Unit/Guaranteed Savings 529 Plans allow you to buy 'units' of tuition which equates to credits or hours.

But, when making 529 plan comparisons there are certain things which never change when considering college funds for kids. However, the things that stay the same aren't the reasons you need a comparison¡­ it's the things that are different that you wish to understand.

When considering which college savings account is best for you in your 529 plan comparison, you should look to see 529 plan ratings; once you've done that, you'll probably consider the Coverdell 529 plan.

Coverdell Education Savings Accounts was formerly called an Education IRA. Some of the key points of 529 plans, and some 529 Coverdell ESA plan comparisons are:
 
1. With both plans you're limited to Contribution Limits of $2,000 per beneficiary per year, and you can't contribute for beneficiaries over the age of 18, unless the beneficiary has special-needs. Therefore, this is useful to those with kids who are less than the age of 18.

2. One main key difference is, the account control goes to a "Responsible individual", who will usually be the child's parent or guardian.

3. Once the child has reached the 'Age of Majority', control may be given to them.

4. With both there's a potential for tax-deferred growth.

5. Earnings on 529 accounts is exempt from federal income tax for qualified withdrawals.

6. Income Limitations are chosen by looking at the Modified Adjusted Gross Income (MAGI); but some limits apply. Once you reach $95,000 MAGI for single taxpayers, eligibility begins to disappear; or $190,000 MAGI for married taxpayers who are filing jointly.

6. Investment Options Variety of options.

7. One key difference between normal 529 accounts from states and Coverdell Education Savings Accounts is, the owner is responsible for making changes to asset-allocation mix.

8. As with other 529 plans, there's the ability to change the beneficiary. This means that you may transfer the account to another member of the child's family who has not attained age 30.

9. Conditions for use¡­ it can be used for tuition, room and board, books, fees, and other expenses at any accredited K-12 school nationwide, or tuition, room and board, books and fees at accredited higher education schools.

And, there's a major difference¡­ It can be used to pay any accredited K-12 school, nationwide. That means you can use it to fund private schooling.

10. As with other 529 plans, the money must be used up by the time the child has reached age 30, unless the child has special-needs.

11. Gift Benefits Contributions are treated as a completed gift from the contributor to the beneficiary.

12. Advantages May transfer to another member of the beneficiary's family.

13. Anybody, including friends or uncles, can contribute.

14.This is very important difference when doing a 529 plan comparison, the funds can be used for primary and secondary school expenses.

15. 529 accounts are not available to high-income families; but children who do qualify can be granted control at the age of majority.

16. Beneficiary generally must use funds by age 30.

17. And, as with other 529 plans, earnings on non-qualified withdrawals are subject to federal income taxes that tack a 10 percent federal tax penalty on. Another main difference is, there's no possibility of doing a five-year accelerated gift tax exclusion.

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