529 plans are quickly becoming the most popular way to save for future college expenses. They’re popular for good reasons. Between the tax deduction benefits and tax free growth, 529 plans make perfect sense for the majority of Americans looking to invest for future college tuition and expenses. All the major financial leaders and icons are pushing these plans as well. As you’ll soon see, 529 plans are built to protect your money!
Making contributions to your 529 plan
You can contribute any of your post tax dollars into a 529 plan. All the money invested in a 529 plan will grow tax free until you decide to pull it out. A smart strategy is to setup an automatic deposit into your 529 account so you don’t forget to contribute!
State tax deductions
You will have to check the regulations in the state you live in, but quite a few allow you to write off your contributions to a 529 college savings plan. If you are saving thousands of dollars a year in a 529 plan, this could be a nice chunk of tax you no longer have to pay your state come tax day.
Earnings can be withdrawn tax free
Did you know that any earnings within a 529 plan can be withdrawn tax free?! Yes, you read that right! There is one stipulation though: the money has to be used for college expenses. If you’re investing in a 529 plan for school then this stipulation shouldn’t be an issue for you.
529 plans are similar to Roth IRA account in the fact that you can contribute as much post-tax money as you want and never pay taxes on the money ever again. Consider the 529 plan like a gift the government has bestowed upon your children and your wallet. Tax protection is what sells the 529 plan.
Are you sold on the 529 college savings plan yet?
Taking the tax advantages into account, 529 plans are pure gold for anyone looking to save for their children and future college expenses. Instead of giving your kids the burden of shelling out thousands of dollars a year, why not open up a 529 plan today and start contributing a little each week?
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