529 Plans

(taxed advantaged college savings plans, "section 529")

The 529 is an exciting new college savings plan that offers tax-advantaged growth when saving for a child's future educational expenses. Beacon Capital Management Advisors can help you start a 529 plan so you can take advantage of saving for your child's college education today.* To learn more about our 529 plan services or to speak with an advisor visit our contact page here.

What is a 529?

529 college savings plans are qualified tuition programs described in section 529 of the Internal Revenue Code. A 529 account can be established by a parent, grandparent or any relative or friend who wants to contribute to a beneficiary's future higher education costs. These plans let you invest larger sums of money than other education savings programs with the advantages of tax-deferred earnings growth and withdrawals free of federal income tax (and state tax free in most cases) if used to pay for qualified education expenses.**

How does a 529 plan work?

529 college savings plans are state sponsored and each state typically selects a mutual fund company to manage the investment portfolios inside the 529.

Most often a parent or grandparent will be the owner of a 529 and would make contributions on behalf of their children or grandchildren as beneficiary. The mutual fund company would invest your contributions using a specific investment strategy. Usually, there are several investment portfolios to accommodate investors with different investment objectives and risk tolerances.

When a student goes to college money can be withdrawn from the 529 plan to pay for the costs of tuition, fees, books, supplies, and equipment such as a computer required by the educational institution for attendance. In general, educational institutions that would qualify under a 529 would include any accredited public or private college or university and any vocational program approved for federal financial aid. Most 529 plans can be used to attend other colleges in other states.***

Are there any income limitations?

No. There is no income limitation regardless of your income.

What are the benefits of a 529 plan?

• Dividends and investment earnings grow tax-deferred from federal income tax. Also, withdrawals are federal tax-free if used to pay for qualified educational expenses.*
   
• Most state 529 plans offer the same tax advantages. Dividends and investment earnings grow tax-deferred and withdrawals are tax-free if used to pay for qualified educational expenses.**
   
• Depending on your state and the size of your 529 contribution, you may be allowed to deduct some or all of the amount you contributed to a 529 plan from your state taxable income. Some states offer this state tax deduction, however you would be required to use your state's 529 plan. **

The variety of features offered by a 529 plan may allow you to accumulate savings for children, grandchildren, other relatives or yourself at a much faster pace than other education savings programs. Learn more 529 college plan specifics here.

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Disclosures:

* The tax bill exempting earnings on qualified withdrawals from federal income tax expires on 12/31/10, requiring Congress to take further action to extend those provisions beyond that date. Non-qualified withdrawals are subject to ordinary income taxes at the account owner’s rate plus an additional 10% federal tax.

** Some states offer favorable tax treatment to their residents only if they invest in their state’s own plan. You should consider whether your state offers a 529 plan with alternative tax advantages and should consult your tax advisor.

*** Please read the particular 529 Plan Description and Participation Agreement carefully prior to investing, available by calling 1-800-880-9833, for more complete information. Please carefully consider investment objectives, risks, charges, and expenses before investing.