For most families, the key to funding higher education is to start saving early and to save regularly. Now there are 529 plans that can help families handle higher education expenses.

What is a 529 Plan?

It's an investment plan designed to meet the requirements of a qualified state tuition program under Section 529 of the Internal Revenue Code. The 529 plans are designed to help families save for future college costs.

Most states sponsor a 529 College Savings Plan. However, each plan may differ dramatically and offer unique benefits or drawbacks. Please talk with a Lara, Shull & May financial planner regarding any 529 plan.

What's So Great About It?

1. State income tax breaks, if applicable.
2. Distributions for qualified costs are tax-free.
3. You, the account holder, stay in control of the account.
4. A 529 plan can provide a convenient, hands-off way to save for college.

529 Overview:

• Open to all U.S. citizens or permanent residents, there are generally no age or income restrictions.
• Investment grows tax-deferred, and qualified distributions come out federally tax-free. (Non-qualified withdrawals from the plan will be subject to income taxes, including a possible 10% tax penalty for withdrawals prior to 591/2 of the owner)
• May transfer funds from one 529 plan to another
• May change beneficiary to another family member, a broad definition
• Qualified costs include: tuition, room & board, fees, books, and necessary supplies (varies by plan)
• Gifting forward -Tax Exclusion $55,000 per person/$110,000 married couple
• May attend any accredited higher education institution, U.S. or foreign
• Participant generally maintains ownership of account
• Contributions are made with after-tax dollars
• May change investment options once each year (refer to individual plan details)
• No guarantees are made on investments
• Some plans offer residents State Income Tax Deductions for contributions

NOTE: These are general characteristics of 529 plans. Each plan may differ and offer different benefits or characteristics that may be more suitable for your individual situation. Before investing, please refer to the plan details and fund prospectus for applicable terms, fees and charges that may apply. As with any investment 529 Plans involve market risk in which the underlying investments will fluctuate and, when redeemed, may be worth more or less than their original costs.

Educational Funding Analysis

Use this quick online tool to help estimate college tuition costs. Educational Funding Analysis

How do I decide which plan is right for me?

Because most states offer one or more 529 plan it is important to evaluate your saving needs and financial situation to decide which plan is right for you. While your home state may offer a plan with state tax incentives, the details of the plan may not be as attractive. For almost every generality discussed you can find at least one state that does things differently. Some states do have age restrictions. Some states do not allow rollovers to any member of the family at any time. Some states do give the beneficiary certain rights. Some states do not allow you to be the beneficiary of your own account. So it is very important that you talk with an advisor to find the plan that best fits your situation.

Open an Account

To discuss which plan is right for you or to start saving in a 529 plan contact Lara, Shull & May at 703-827-2300 or information@larashullmay.com.

For more information on section 529 plans please click here.