529 Accounts Can Pay For Your College Needs
With the poor shape of the economy and the cost of a college education rising faster than the rate of inflation during the last several years, a college education has gone beyond the reach of many. Some say a higher education has indeed become a privilege for a selected few.
529 accounts offer a scheme in which parents or guardians can save with a tax-deferred account for their children's education. 529 accounts are administered by various managers, usually with a fairly low fee. One advantage offered is that you do not need to pay taxes on the interest accrued. Another is that you aren't locked in to one beneficiary. If your student decides not to go onto higher education, you can change the beneficiary.
529 accounts can be used for paying college fees and other costs like books, computers, room and board, school supplies and other such expenses. Obviously, these college savings accounts serve the purpose better if opened when the child is young. With eighteen years or more to invest and grow, and taxes on interest deferred, even small regular deposits can add up to a large number. Most 529 accounts offer multiple investment options so you can start off with an aggressive portfolio and move into more conservative investments as college approaches.
With 529 accounts, you will not have to pay federal taxes for all your withdrawals as long as they are used for qualified educational expenses. Depending on the state you live in, they may be state-tax free, as well.