9 Things You Probably Don't Know About College Savings Plans For the 2013-2014 school year, the

College Board reports that the average cost of college tops $40,000 at a private school and over $18,000 for pu lic! "t#s no $onder that parents start to feel the pressure efore a $ould- e student can even read! %hat#s $hy &any parents turn to the '2( savings plan, $hich is a state-sponsored, ta)advantaged invest&ent account open to anyone! *hile &ost of us have heard the $ords +'2( plan,+ these accounts co&e $ith a ton of advantages you &ay not ,no$ a out! -ichael .gan, CF/ and founding partner of 0irginiaased financial planning fir& .gan, Berger 1 *einer, sheds light on ho$ to &a,e the &ost of a '2(2 529s aren't just for tra itional !ollege " or li#ite to tuition$ +3ne of the est things a out a '2( is that it#s so fle)i le,+ says .gan! +4ou can use it for undergraduate or grad school, or even for technical school or trade school, to pay for tuition, fees, and oo,s!+ Anyone !an o%en an !ontribute$ 5 parent, grandparent, godparent, particularly generous neigh or, or anyone else can open a '2(! 6i,e$ise, anyone can contri ute to one and ta,e the appropriate ta) deduction! Another fa#ily #e#ber !an use the #oney$ *hile the adult $ho opens the plan is the plan#s o$ner, the eneficiary is the person $ho receives the &oney 7 and it can e changed! "f one child decides not to go to school, goes to a cheaper school than e)pected, gets a full scholarship 8&ore on that in a &inute9, or for so&e other reason doesn#t use all of the &oney, you can si&ply change the eneficiary on the account and give those funds to another child : or even to yourself, if you#d li,e to go ac, to school! &f your 'i gets a full ri e( you !an have the #oney ba!'$ "f you saved &ore than you needed in your '2( and try to pull that &oney out to use for costs other than education, you#ll pay a fee! ;o$ever, there#s one &a<or e)ception2 +"f you#re not using the &oney ecause the ,id gets a full scholarship, the penalty is $aived,+ says .gan! +"t#s a federal rule, so it applies to all plans!+ You !an !hoose whi!h 529 you want to use$ =ince the plans are state-sponsored, each state runs one or &ore of their o$n, and savers are allo$ed to choose $hich they prefer! 5t savingforcollege!co&, there are 114 options, and each one has a slightly different invest&ent structure! ;o$ever, +if you don#t use your o$n state#s plan, and you live in a state $ith inco&e ta)es, you &ay &iss out on a ta) deduction,+ $arns .gan! +%here $ould have to e a really co&pelling reason to go outside your o$n state, li,e if the other plan had significantly lo$er e)penses and, in net of the ta) deduction, you#d still save &oney!+

You !an have #ore than one a!!ount$ %hat said, the fact that you can open &ore than one '2( &eans that if you have an open account and &ove out of the state, you can ,eep your &oney in your original '2( and open a ne$ one in your ne$ state! *hile you can choose to consolidate the&, .gan &entions that so&e states $ill re>uest the &oney fro& your ta) deduction ac, if you $ithdra$ the funds 7 in $hich case you &ight as $ell leave it! "n fact, any fa&ily $ith &ore than one ,id ound for higher education should have an account per child! +For the average person, it#s easier to thin, of an account per child instead of one collective pot to e divvied up,+ e)plains .gan! +%hen you ,no$ that =u?y has her o$n savings, ut you could ta,e &oney for =u?y out of @ohnny#s pot if you needed to! "t also gives the a ility to get &ore deductions 7 three plans for three ,ids allo$s three ti&es the deduction!+ You !an store a lot of #oney$ *hile the &ost generous a&ong us have to loo, out for incurring a gift ta), $hich is a ta) designed to discourage sheltering inco&e in +gifts,+ you can contri ute up to $14,000 per year, per child, and per donor! +5 hus and and $ife could put in $28,000 a year, per child, $ithout the gift ta) eing an issue,+ says .gan! 5nd in states li,e 0irginia, he adds, there is no cap on the ta) deduction you can ta,e! You !an front)loa the a!!ount$ "f you need it, there is a $ay around the donation li&it2 4ou can give up to five years# $orth of contri utions at once 7 that#s $A0,000 per person! +"n year one of the plan, you &ight see a grandparent $ho has done really $ell for the&selves and $on#t need the &oney &a,e this ,ind of contri ution,+ .gan e)plains! +"t &eans they $on#t e a le to contri ute for the ne)t five years, ut y putting the &oney in early, they#re giving it &ore ti&e to co&pound, and they#re getting it out of their estates!+ A 529 !an last for generations$ %here is no e)piration date on a '2(! +"f you front-load your grandchild#s '2( t$ice, odds are they &ay not spend $140,000 $hen they go to college,+ says .gan! +%hat &oney could stay in the account and go to their ,ids! 4ou could ,eep it as a &ultigenerational fa&ily trust!+ The botto# line* *hether or not you choose to use a '2( 7 although for al&ost everyone, it#s the est choice 7 get started as soon as possi le! Bote that you do have to $ait until the a y arrives, since eneficiaries &ust have a =ocial =ecurity nu& er! =oon after$ard, start &anaging your child#s e)pectations! .gan reco&&ends having discussions $ell efore college a out ho$ &uch &oney you#ll e providing and ho$ &uch your child is e)pected to chip in! +%he iggest &ista,e " see is parents $ho try and pay 100C of a child#s college costs and scre$ up their o$n retire&ent ecause of it,+ says .gan! +%hey run out of &oney efore they run out of life and have to live $ith their ,ids for 1' years!+