“Education Savings Plans” are a bit more useful. They are an investment account and will pay for qualified higher education expenses for the beneficiary: tuition, fees, room, and board. They can generally be used at any college and can also be used to pay for elementary or secondary schools up to certain limits per year. Remember that these are investments and that investments come with risk. Your broker will always bill you for your business and with this plan being tied to the market you could wake up one morning and have the account with a $0 balance.
You may want to (most likely should) get the advice of a tax specialist. The object with 529’s is to have the tax advantage of not having to get taxed on the money you put into it. If the funds are withdrawn for unqualified use, they will be taxed, and an additional 10% federal tax penalty will be applied to earnings. See www.sec.gov and search 529 for more information on these savings plans.
Is a 529 college savings plan a good idea? That depends! There are so many aspects to be looking at and everyone is unique to the individual. My challenge to you is to be actively engaged in college planning if there is someone in your life that will be attending in the future. If you aren’t, you will pay too much. Just getting by on loans is a mistake that will put you in massive debt. I appreciate that you read the column. Thank you! I will answer any of your college planning questions and all comments directed or at Scott@Arenscp.com..■