For parents, the rising cost of higher education can make saving for a child’s education seem like a daunting task. When you are looking to save for higher-education expenses, taking advantage of a 529 account can be a great option.
There are several benefits that come when saving and investing through a 529.
One of the primary advantages of investing and saving through a 529 is that it will come with a variety of tax benefits. With a 529, all of your contributions will be made on a post-tax basis.
However, once the money is in the account, it can grow with compound interest and lead to significant gains as the years go by.
Eventually, you will be able to pull the money out of the account tax-free, as long as you spend the money on qualified education expenses.
Beyond providing federal tax benefits, there are state tax benefits as well. Most states will allow withdrawals to be made without state taxation.
Further, many states offer 529 programs that will allow you to deduct the money you spend off of your state tax return, which can reduce your state tax liability each year.
Flexible Use of Funds
While a 529 account needs to be used for education purposes, there are a lot of options for what the money is specifically spent on. The money can be used to pay for tuition, housing, books, and other associated expenses.
It can be spent to go to college, a trade school, or even to go to a private high school. If you have multiple children that you are opening a 529 for, it will also be easy for you to transfer funds from one account to the next.
Easy Investment Choices
When investing through a 529, you will also find that there are far easier investment options to consider. Many 529 accounts will provide you with investment options and funds that you can put your money into.
They also may have age-based investment programs that will help you allocate your investment strategy based on how many years until the money in the account is needed. This way, you will not be invested too aggressively in the years approaching the start of your child’s education.
Simplicity of Saving
When you invest and save through a 529, you will also find that the process to do so is easy. Most people that invest through a 529 will establish automatic withdrawals and investments that will ensure their money is taken out of their account each month.
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While they may seem like small investments upfront, they can quickly add up to larger sums of money over time. Additionally, anyone that is looking to give a gift or contribute towards a child’s education will be able to make investments into this account as well.
Saving and investing in someone’s future education costs are very important. When you are trying to save and invest for this goal, doing so through a 529 is a great option. There are several important benefits of investing through a 529 that can make it a great option for you.
Image Credit: investing for college through a 529 by envato.com
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