Your Family’s Business | 529 College Savings Plans

| September 23, 2014

Bush-Wealth-Advantage-4Stacy Bush, Valdosta Today Business Contributor

Section 529 college savings plans are tax-advantaged college savings vehicles and one of the most popular ways to save for college today. Much like the way 401(k) plans changed the world of retirement savings a few decades ago, 529 college savings plans have changed the world of college savings.

Tax advantages and more
529 college savings plans offer a unique combination of features that no other college savings vehicle can match:

• Federal tax advantages: Contributions to your account grow tax deferred and earnings are tax free if the money is used to pay the beneficiary’s qualified education expenses. (The earnings portion of any withdrawal not used for college expenses is taxed at the recipient’s rate and subject to a 10% penalty.)
• State tax advantages: Many states offer income tax incentives for state residents, such as a tax deduction for contributions or a tax exemption for qualified withdrawals.
• High contribution limits: Many plans let you contribute over $300,000 over the life of the plan.
• Professional money management: College savings plans are offered by states, but they are managed by designated financial companies who are responsible for managing the plan’s underlying investment portfolios

These are just a few of the many tax advantages that come with 529 plans.

Choosing a college savings plan
Although 529 college savings plans are a creature of federal law, their implementation is left to the states. Currently, there are over 50 different college savings plans available because many states offer more than one plan.

You can join any state’s 529 college savings plan, but this variety may create confusion when it comes time to select a plan. Each plan has its own rules and restrictions, which can change at any time.

Account mechanics
Once you’ve selected a plan, opening an account is easy. You’ll need to fill out an application, where you’ll name a beneficiary and select one or more of the plan’s investment portfolios to which your contributions will be allocated. Also, you’ll typically be required to make an initial minimum contribution, which must be made in cash or a cash alternative.

Thereafter, most plans will allow you to contribute as often as you like. This gives you the flexibility to tailor the frequency of your contributions to your own needs and budget, as well as to systematically invest your contributions. You’ll also be able to change the beneficiary of your account to a qualified family member with no income tax or penalty implications. Most plans will also allow you to change your investment portfolios (either for your future or current contributions) if you’re unhappy with their investment performance.


Stacy Bush has practiced independent financial advising in the Valdosta area for 14 years. Growing up on a farm in Donalsonville, Georgia, he is keen to the financial needs of South Georgia and North Florida families. Stacy and his wife, Carla, live in Valdosta with their four children. You can submit questions about this article to

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