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529 Plan - PowerPoint PPT Presentation


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529 Plan. Basic Questions Q: What is a 529 Plan? A: A 529 Plan helps families set aside money for their child’s future college cost. Q: Who can open a 529 Plan?

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Presentation Transcript
slide2
Basic Questions
  • Q: What is a 529 Plan?
  • A: A 529 Plan helps families set aside money for their child’s future college cost.
  • Q: Who can open a 529 Plan?
  • A: Anyone! It’s never too early for a parent to start thinking about their child’s education! Even students can open them, however, if a student opens a prepaid tuition plan themselves there may be some restrictions.
  • Q: Are 529 Plans only for my state’s public colleges?
  • A: Nope! There are two types of 529 Plans; savings programs and prepaid programs.
  • Savings programs let your child go to any college or university in our country. There are even some that allow foreign institutions!
  • Prepaid programs usually are for in-state colleges. However, your contract can be changed if your child decides to go to a private or out-of-state college.
  • http://www.savingforcollege.com/intro_to_529s/what-is-a-529-plan.php
slide3

Benefits

  • There is basically two types of 529 Plans, each
  • one having their own special benefits.
  • Prepaid Tuition Plan: Tuition prices remain the same to certain colleges and universities
  • College Savings Plan: Covers tuition , fees, room/boarding, and books to any college or university in the United States.

http://money.howstuffworks.com/personal-finance/college-planning/financial-aid/5294.htm

slide4

Differences

http://www.savingforcollege.com/intro_to_529s/what-is-a-529-plan.php

slide5
All 50 states have at least one kind of 529 Plan,
  • other states may offer multiple plans. Certain
  • Private colleges and universities offer their own
  • Prepaid tuition plan.
  • http://www.savingforcollege.com/college_savings_201/
slide6
Basic Questions
  • Q: What happens if the 529 Plan does not get used?
  • A: Well, there will be a 10% penalty on earnings. Once it is payed, the account holder may do with the money as they please.
  • Q: Are there gift and estate tax benefits for 529 Plans?
  • A: Yes.
  • The gift tax benefit lets the account owner give $13,000 a year without paying tax.
  • Whereas, in a state tax benefit, what you own leaves your estate but doesn't leave your control. For instance, if a person decides to later nullify the account, its value comes back into the persons estate. The account owner controls all of it.
  • Q: Can people have 529 plans from multiple states?
  • A: It is only necessary to have 529 Plans from only one or two states. However, people can open as many as they want from multiple states.
  • http://www.savingforcollege.com/intro_to_529s/what-is-the-penalty-on-an-unused-529-plan.php
slide7
A 529 Plan does affect financial aid.
  • If families have money put aside, then the financial aid will be reduced because the student has some money already going towards college.

http://www.savingforcollege.com/intro_to_529s/name-the-top-7-benefits-of-529-plans.php

slide8
What questions should be asked before investing in a 529 Plan?
  • Is the plan available directly from the state or

plan sponsor?

  • What fees are charged by the plan?
  • How much of my investments goes to paying the middle man

(broker)?

  • What are the plan's withdrawal restrictions?
  • What type of investment options are offered by the plan?
  • Does the plan offer special benefits for state residents?
  • What limitations apply to the plan?
  • Who is the program manager?
  • Who are these people in charge of the plan?
  • http://www.sec.gov/investor/pubs/intro529.htm
slide9
Basic Questions
  • Q: How does investing in a 529 Plan affect federal and state income taxes?
  • A: When people invest in a 529 plan, the money gained in their plan is not going to be taxed by the federal and state government as income. As long as the only money the people take out of their 529 Plan account goes directly to certain college costs under that plans.
  • Q: What fees and expenses will I pay if I invest in a 529 Plan?
  • A: A person choosing a prepaid tuition plan is charged enrollment fees in getting into the plan and administrative fees in order to maintain over time the person's individual plan.
  • College savings plans also charge enrollment fees, yearly maintenance fees, and managing what you own fees in the plan. If a person purchases a plan from a middle man (broker) to a group plan under a bank or institution, there will be additional sales fees.
  • http://www.savingforcollege.com/intro_to_529s/name-the-top-7-benefits-of-529-plans.php
slide10
There is a way to purchase a 529 Plan that can
  • eliminate some of the additional fees.
  • A person can purchase a 529 Plan and cut back on
  • their extra fees by obtaining a direct-sold college
  • savings plan. This type of college savings plan allows
  • the person to buy directly from a program manager or
  • plan's sponsor without any middle man
  • (broker) in between the person and the plan itself.
  • http://www.sec.gov/investor/pubs/intro529.htm
slide11

The restrictions that apply to an investment in a

529 plan are withdrawal restrictions. Each plan

has certain college expenses

that they will cover. Only

taking money out for those

specific expenses will prevent

taxing or penalty costs for

withdrawing any money from

other than what that plan

says Is an okay expense to pay.

http://www.sec.gov/investor/pubs/intro529.htm

  • The restrictions that apply to an investment in a
  • 529 plan are withdrawal restrictions. Each plan
  • has certain college expenses
  • that they will cover. Only
  • taking money out for those
  • specific expenses will prevent
  • taxing or penalty costs for
  • withdrawing any money from
  • other than what that plan
  • says Is an okay expense to pay.
slide12
Basic Questions
  • Q: From who do you buy a 529 Plan from?
  • A: Someone can buy a 529 Plan through a 529 plan manager or a financial advisor.
  • Q: How do you contribute to a 529 plan?
  • A: People are allowed to deposit in the account over $300,000 per beneficiary in many state plans. There is no income limitations or age restrictions.
  • Q: Can you use the money in a 529 Plan only if you go to a state school?
  • A: No, you can use it for both private or out-of-state colleges.
  • Q: Can 529 Plans bought in one state be used in other states? Are there any restrictions? What are they?
  • A: Yes, my choice of a school is not affected by the state that your 529 savings plan is from. Withdrawal restrictions apply to both college savings plans and pre-paid tuition plans. Limited investment options and are not permitted to switch freely among available investment options (can only change her own investment option one time per year.

http://www.savingforcollege.com/intro_to_529s/what-is-a-529-plan.php

slide13
The best 529 Plan available are determined by a
  • person's circumstances and their goals. If
  • someone wants to know their options they are
  • welcome to go on College.com to learn more.
  • http://money.howstuffworks.com/personal-finance/college-planning/financial-aid/52911.htm
slide15

What Are 529 Plans For?

To save up for future college costs.

slide16

What Are The Two

Types Of 529 Plans?

Prepaid Tuition

and College Savings Plan

slide17

How Many States

Have A 529 Plan?

All 50 states offer

at least one type of 529 plan.

slide18

Does A 529 Plan Affect

Financial Aid?

Yes, it reduces financial aid.

slide19

Does A 529 Plan Only Cover

State Colleges?

Nope, it covers most

state and private colleges

along with some colleges overseas.