Chris O'Shea
The costs of higher education are going up and some people are taking action by contributing to 529 plans — or even increasing their contributions. These savings vehicles have numerous advantages and can help make college more affordable.
529 Plans are on the Rise
According to a recent report, investments in 529 plans grew from $412.5 billion in June of last year, to $450.5 billion this year. That’s almost a 10 percent increase. Part of that is due to parents coming around to 529 plans as a good way for their kids to pay for their education (another part is a factor of growth in the investments that these plans hold).
What Parents Can Do
Some parents are now asking friends and loved ones for 529 contributions as presents. In one survey from last year, just 45 percent of parents said they’d ask family or friends to contribute to their kids’ plans. Now? That percentage has jumped to 65. That’s quite a leap. In the same report, 74 percent of parents said they have a 529 plan for their kids, up from just 53 percent in 2007.
529 Benefits
The reason parents are becoming more interested in 529 plans is because of their many advantages. In most states, contributions to 529 plans are tax-deductible, even if you aren’t the owner of the plan or the beneficiary. The contributions to 529 plans also grow tax-free, and withdrawals made for education-related expenses aren’t taxed. Depending upon where you live, you may even get a state tax deduction for contributing.
Do One Thing: Consider opening a 529 plan for your child to help make higher education more affordable.
Jean Chatzky
