Tax Deferred College Savings Plans

Saving for College: the 529 Plan

One of life's major expenses is a college education. The state 529 plans offer another option for saving for college that may be useful to middle and upper class U.S.A.

Update: Major brokerages now support 529 plans and can help you set them up and fund them.

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 You may be acquainted with the older prepaid tuition plan offered by selected state colleges, but there is a new variety that is not yet well known. This is the college savings plan.

Approximately 23 states currently offer these plans and about 17 of these are available to out of state residents.

What makes these interesting?

The Education IRA has the advantage of tax free withdrawal as long as the money is used for higher education. But the Education IRA has two distinct disadvantages:

Before leaping on the 529 "bandwagon", be aware of several considerations:

For those considering these plans we recommend first doing some research on your own. We give you a couple of links below to get started. And then, get the advice of a knowledgeable person such as a financial advisor. But don't assume that all financial advisors will know all about this area. Ask the advisor about his or her exposure to the 529 plans before committing to that advisor.

Here is an excellent link to help you get started on learning about 529 plans:

A source page of information on 529 plans
This website provides a wealth of information about the 529 plans. It includes a rating on the 529 plan for each participating state, articles from their newsletter, and links to other sites and articles All of the information has been maintained rigorously up to date as of the time of this article (4/2/00) and we would expect it to be so maintained in the future. We have not reviewed the book that is advertised on the site,

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