529 Savings Plan

DEFINITION of '529 Savings Plan'

A tax-advantaged method of saving for future college expenses that is authorized by Section 529 of the Internal Revenue Code. The plan allows an account holder to establish a college savings account for a beneficiary and use the money to pay for tuition, room and board, mandatory fees and required books and computers. The money contributed to the account can be invested in stock or bond mutual funds or in money market funds, and the earnings are not subject to federal tax (or state tax, in most cases) as long as the money is used only for qualified college expenses. The plans are open to both adults and children.

BREAKING DOWN '529 Savings Plan'

States have their own 529 savings plans with unique features. An individual can open a 529 plan in any state, and the plan does not have to be in the account holder's or beneficiary's state of residence.

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RELATED FAQS
  1. What are the risks involved in a banker's acceptance?

    Learn about the different kinds of college savings accounts, how they can benefit a college saver and how to open these savings ... Read Answer >>
  2. How much should we put in a 529 each year to pay for college for two kids?

    If we have two kids, three and one years old, and assume we are on track for retirement, how much should we potentially put ... Read Answer >>
  3. Can mutual funds have beneficiaries?

    Learn about the different types of mutual fund ownership and the various ways beneficiaries can be established. One common ... Read Answer >>
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    My family is expecting our first grandchild this week! I want to invest $10K for her on the day she is born. I would like ... Read Answer >>
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    I recently started a news business and would like to start saving for my 2 year old's eventual college tuition. When is the ... Read Answer >>
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