Hi folks, J.G. Wentworth here, continuing our series of blogs on how to pay for college. Today we’d like to talk about 529 plans, which are important education-savings plans offered in just about every state in the country.
529 plans are named for a specific section of the IRS code created to help Americans pay for a higher education. These plans allow college-goers, and their loved ones, to receive federal (and sometimes state) income tax breaks on their college savings accounts.
There are two types 529 plans: prepaid plans and savings plans. Prepaid plans allow you to buy tuition credits at current rates that you can apply in the future. While only 12 states currently offer a prepaid tuition plan, they may be worth investigating if you have a specific state or educational institution in mind.
More often, 529 participants use the more traditional 529 savings plan, which provides considerable savings on money applied to the cost of college. Specifically, whatever money you contribute to your 529 grows tax-deferred – and is allowed to be withdrawn to pay for college, without being assessed any federal taxes or penalties.
Your best bet is to start a 529 plan for yourself or a loved one as soon as possible (some like to open 529 plans for their children just days after they are born!), so as to give the account time to grow. But it is never too late to start a 529; over time, it can be applied towards graduate school should the need arise – and even transferred to another qualifying family member so he or she can benefit!
We hope the above offers a good introduction to the amazing benefits of a 529. For more information, we encourage you to do more research on how the 529 plan operates in your state – and to get started on making contributions to your own college-savings plan as soon as you can.
Future blogs will continue to explore other options available to those looking to pay for a higher education. In the meantime, please know that J.G. Wentworth is available day and night to help you get cash out of your future structured settlement or annuity payments. Whether it is to pay for college, cover a medical expense, or to pay for any other sudden costs requiring cash now, our trained J.G. Wentworth representatives are prepared to talk to you about your specific financial situation at 877-227-4713.
Every individual’s financial situation is unique. J.G. Wentworth and its representatives do not provide financial, legal or tax advice. You should consult a qualified tax and/or legal professional for advice and information concerning your particular situation.