For All the NT Parents--Best 529 College Savings Plans for 2014

Joined May 8, 2012
I know there are some parents here that would appreciate this sort of info. It's hard to find investment outlets that can also be used as a tax-advantages as well.

A little background info:

What is a 529 College Savings Plan?

A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.

What are the tax benefits?

529 plans offer unsurpassed income tax breaks. Although your contributions are not deductible on your federal tax return, your investment grows tax-deferred, and distributions to pay for the beneficiary's college costs come out federally tax-free. The tax-free treatment was made permanent with the Pension Protection Act of 2006.

Your own state may offer some tax breaks as well (like an upfront deduction for your contributions or income exemption on withdrawals) in addition to the federal treatment. You should research what benefits residents receive for investing in your own state's 529 plan.

Who controls the account?

You, the donor, stay in control of the account. With few exceptions, the named beneficiary has no rights to the funds. You are the one who calls the shots; you decide when withdrawals are taken and for what purpose. Most plans even allow you to reclaim the funds for yourself any time you desire, no questions asked. (However, the earnings portion of the "non-qualified" withdrawal will be subject to income tax and an additional 10% penalty tax). Compare this level of control to a custodial account under the Uniform Transfers to Minors Acts (UTMA) and you will find the 529 plan gives you much more say in how your investment is used!

What else do I need to know about 529 College Savings Plans?

a 529 plan can provide a very easy hands-off way to save for college. Once you decide which 529 plan to use, you complete a simple enrollment form and make your contribution (or sign up for automatic deposits). Then you can relax and forget about it if you like. The ongoing investment of your account is handled by the plan, not by you. Plan assets are professionally managed either by the state treasurer's office or by an outside investment company hired as the program manager.

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Joined Apr 15, 2013
Not a parent, but repped for taking the time to care about the future :smokin
Joined Aug 9, 2012
Yea I have been thinking about setting one up for my kids(I have none now) every so often this year. I may provide one for my nephew since I am not sure if his parents are looking that far into the future for him.

One up OP.....Keep that hand sanitizer on deck tho
Joined Mar 14, 2006
I had one for my daughter but decided to close it recently. It was tough for me to save for retirement AND my daughter's education so I decided to beef up my Roth since they funds could be withdrawn for education expenses less the 10% penalty.

All the investment plan stocks and funds were through Vanguard so if they aren't performing as well as say a Scwab ETF, I couldn't capitalize.

To those who are considering it, make sure you know the difference between the 529 Investment Plan and the 529 Savings Plan. Good luck and good job thinking about your children's future.
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