Saving for College: An Overview of 529 College Savings Plans

I found Bobby in the fetal position behind the dumpster of my apartment complex. "What's wrong?" I asked.

"I passed out, Mr. Yale."

I was alarmed at his response. I had never known Bobby to drink, and here he was passed out behind the dumpster of my apartment complex in the fetal position. His eyes were swollen, his cheeks drawn, and chicken nugget vomit dripped down his neck. "I'm ruined," he said, "I didn't get the scholarship, and I can't afford Harvard. If only my parents would have started a 529 College Savings Plan when I was young!"

Don't let this happen to your kids. Start a 529 College Savings Plan now.

There are many reasons to consider a 529 Savings Plan:

1. Funds can be used for qualified higher education expenses. These include tuition, books and supplies, room and board, and fees at most accredited colleges and universities.
2. There are no income limits. Any U.S. citizen or resident, 19 or older, can open a 529 account. Corporations, trusts, and some not-for-profit organizations are also eligible.
3. Most states offer a plan for as little as $1,000.
4. You can add to the account value until it reaches $300,000 with accumulated earnings allowed beyond this point.
5. The account owner controls the account at all times, even after the beneficiary turns 18. The beneficiary can be switched at any time to another family member.
6. Earnings accumulate tax-deferred.
7. Withdrawals are exempt from federal taxation if the funds are used for qualified higher education expenses. Keep in mind that funds used for something other than higher education are subject to taxes on withdrawal and a 10% penalty (similar to an IRA).
8. You don't want your children to end up behind the dumpster of your apartment complex, in the fetal position, with chicken nugget vomit dripping down their chin because they can't afford to get into a good school.