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Saving For College

Posted September 12, 2012 in Advice Column, Greene County

I think I can safely say that we all want the best for our children. Nowadays, that means education beyond high school in the form of college or technical training.

Unfortunately, the cost of that education seems to go up every year, keeping it out of reach for many families.

Even if you don’t have much to put toward college now, you’d be surprised how regular contributions and compounding may work to your advantage. The key is to start as soon as possible.

With a 529 College Savings Plan you can help the student in your life save for a college education while you take advantage of the many outstanding benefits including tax advantages, high contribution limits, account owner control, beneficiary flexibility , no income limitations, no age or time limitations on contributions or withdrawals and potential estate tax savings.

Frequently asked questions about 529 Plans include:
• How much can I invest? You can invest as much as $250,000 per beneficiary.
• Are my contributions tax deductible? Contributions are not deductible from your federal tax returns, but your investments can grow free from federal tax. Additionally, some states allow a deduction from (or a credit against) state taxes for all or part of the contribution.
• Can I set up an account for anyone? Yes. You can set up a 529 college savings account for anyone — a child, grandchild, spouse, niece, nephew, friend or a neighbor or yourself if you plan on going back to school.
• Can I change the beneficiary? Yes. You can change the beneficiary as often as you like. To avoid taxes and a penalty, the new beneficiary must be a member of the previous beneficiary’s family which includes children, grandchildren, siblings, spouses, nieces, nephews, aunts, uncles, cousins and in-laws. In some cases, a change in beneficiary may be subject to federal gift tax.
• What expenses can I pay for with a 529 plan?  529 college savings account assets can pay for tuition, room and board, books and supplies.
• What if my beneficiary doesn’t go to college?  You can select a new beneficiary who is a member of the previous beneficiary’s family without tax or penalty. The funds can be withdrawn, but you will have to pay federal income tax and may face a 10 percent federal tax penalty on your earnings.

Securities, advisory services and insurance products are offered through Investment Centers of America, Inc. member FINRA, SIPC, a registered investment advisor and affiliated insurance agencies. ICA does not provide tax or legal advice.

Investors should consider carefully the investment objectives, risks, charges and expenses of the municipal fund before investing This, as well as other important information, is contained in the official statement. An investor’s home state may only offer favorable tax treatment for investing in a plan offered by such state. Consult your tax advisor regarding state and federal tax consequences of the investment. Participation in a 529 Plan doesn’t guarantee that the contributions and investment return will be sufficient to cover future higher education expenses. Investments involve risk and you may incur a profit or a loss.

Information provided by Timothy J. Heisterkamp, Investment Centers of America, 115 W. State St. Jefferson;  515-515-386-2570.

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