Also known as 529 college savings plans, these are tax-advantaged investment accounts designed for education savings. They work much like a Roth 401 (k) or Roth IRA by investing your after-tax contributions in mutual funds or similar investments. 529 plans offer several investment options from which to choose.
Should you invest in a 529 plan?
If you like the idea of saving for education expenses while also getting tax-advantaged investment growth, consider a 529 plan. A 529 plan is a tax-advantaged vehicle to save for college and trade and vocational courses participating in U.S. Department of Education student aid programs. You can even apply 529 funds to qualified K-12 expenses.
What are the different types of 529 plans?
There are two basic types of 529 plans: educational savings plans and prepaid tuition plans. Section 529 plans are sponsored and run by the 50 states and the District of Columbia. The rules and fees of 529 plans differ from state to state. These plans can be used directly through state platforms or via a broker or financial advisor.
