529 Savings Plan

George is a Registered Representative with and offers insurance products and securities through Linsco/Private Ledger.

With George Shaw

George is a Registered Representative with and offers insurance products and securities through Linsco/Private Ledger.

A recent sign on a retail establishment read: “If you think education is hard, try ignorance!”

Good humor and also good advice for both aspiring students as well as their parents. If you have a child (or grandchild) and you’re thinking about investing in his/her future education, here are a few things to consider with regard to 529 Savings Plans.

Earnings free from federal taxes and, through 2010, withdrawals free from federal taxes if used for qualified higher education expenses.
Contributions of up to $11,000 a year ($22,000 for married couples) without gift-tax consequences. Or, under a special election, up to $55,000 ($110,000 for married couples) can be contributed at one time by accelerating five years’ worth of investments. However, no other contributions can be made for the next four years.
No income limits. Unlike a Coverdell Education Savings Account, people of all income levels can contribute to a 529 Account.
Investment mix may be changed once a year or whenever a new beneficiary is selected. As the beneficiary gets closer to college, you may want to revise your investment mix to fit your changing time horizon.
You maintain control of the assets and decide when the money will be spent.
The beneficiary can be anyone—a child, grandchild, a niece or nephew, a friend, or even the contributor. The beneficiary may also be changed without tax consequences to another member of the beneficiary’s family.
May be used for most higher education including college, graduate and post-graduate study, and technical training. Tuition, room and board, books, and certain other fees and expenses are all qualified higher education expenses at an eligible educational institution.
If you withdraw money for something other than qualified education expenses, you will owe federal income tax and may face a 10% federal tax penalty on earnings.
Under current tax law, the ability to withdraw money free from federal tax from a 529 College Savings Plan ends in 2010, but this may be extended.
529 Plan holdings could impact the beneficiary’s ability to qualify for grants and student loans.
Some states offer residents an incentive to invest in their state-sponsored 529 College Savings Plans. Be sure to consider how this contribution will affect your state tax bill.

For more information on 529 Savings Plans, contact any member of PB Investment Services at Paducah Bank. The number to call is 575.6636.