529 College Saving Plans
A 529 plan is a way for parents and families to set aside money for their child's future college education with special tax advantages. 529 plans are free from federal income tax, while states offer their own various tax advantages.
Types of 529 plans
There are two types of plans. States as well as higher education institutions can offer prepaid plans.
Pre-paid plans allow for the "pre-purchase" of tuition paid out at the future cost, affected by tuition inflation, when the beneficiary enters college.
Savings plans can only be offered by states and consist of investments such as mutual funds. Account earnings for savings plans are based on market performance.
