529 plan
Families that save early pay less for school, reduce their needs to borrow and have more funds available later in life. How you save, where you save, when and who do you save for are big questions.
Qualified Tuition Plans (QTPs, 529 Plans) are an education saving plan operated by the state. 529 plans are the best way to save for college. It’s an investment account that has Tax Benefits. You can use it to pay for college, k-12 tuition, even student loans repayment. Your state have tax breaks as well (Besides the federal tax benefits, over 30 states offer a full or partial tax deduction or tax credit for 529 contributions). 529 are low maintenance accounts, yet highly flexible. You can also roll 529 funds into a Roth IRA.
Qualified higher education expenses normally include school tuition, fees, books, equipment (such as computers) required for enrollment of the beneficiary at an eligible college. They can also include costs of room and board for a half-time student.
Contributions to a QTP on behalf of student can’t be more than the amount to provide for the qualified education expenses, but there is no federal limitation. The maximum contribution allowance is determined by each state. There are no income restrictions on the individual contributors.
The QTP owner has no direct control over how the QTP funds are invested. The owner normally choose the investment strategy that would fit their needs. If one has a beneficiary who will be attending school in the short-term, they will select a moderate strategy; If the beneficiary is still very young, then invest in aggressive funds, primarily in equity funds.