If college is in your child's or grandchild's future, a 529 plan may be in your future.
So-called 529 plans (named after Section 529 of the Internal Revenue Code) allow states to give tax breaks that encourage individuals and families to save for college.
The plans are a little bit like 401(k) or IRA plans, with 529s earmarked for college expenses.
The younger the child, the more valuable 529 plans become. Gains from the plans' tax advantages become more pronounced over time.
Some states have multiple 529 plans. North Dakota and Minnesota each have one.
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North Dakota's plan, once widely criticized for its high costs, among other things, was revamped a year ago and gets better marks now.
A huge plus to North Dakota's plan:
Contributions are deductible when figuring state taxable income.
"This is a major advantage," said Eric Hardemeyer, president of the Bank of North Dakota, which administers the plan.
Minnesota's plan doesn't offer that feature, although it has added investment options in the past year.
Neither state's plan requires a designated beneficiary to attend college in that state.
Both plans allow the beneficiary to be changed provided the new beneficiary belongs to the former beneficiary's family.
Here's a look at the two plans:
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North Dakota
- Name of plan: College Save
- Who's who: Administered by the bank of North Dakota and managed by Upromise Investments, a Boston-based provider of administrative services for 529 plans
- Investment manager: Vanguard, a major mutual fund company
- Investment choices: Nine options whose underlying investments are Vanguard mutual funds
- Who can contribute: Anyone. You don't need to be a parent of the beneficiary or a state resident. However, there is an annual maintenance fee for out-of-state residents.
- Minimum contributions: $25
- Maximum: $269,000
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- More information: www.collegesave4: www.collegesave4u.s.
upromise.com.
Minnesota
- Name of plan:
Minnesota College
Savings Plan
- Who's who: Administered by the Minnesota Office of Higher Education
- Investment manager: TIAA-CREF, a prominent financial services company
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- Investment choices:
Six options. Five have underlying investments
in TIAA-CREFF mutual funds. The sixth is a guaranteed option invested with TIAA-CREF Life Insurance Co.
- Who can contribute? Anyone. You don't need to be a parent of the beneficiary or a state resident.
- Minimum contributions: $25, or $15 per pay period via payroll deduction
- Maximum: $235,000
- More information: www.mnsaves.org .
State plans could be good options Jon Knutson 20080106
