Basics of 529 College Savings Plan
529 College Savings Plan in Illinois is an important tool for parents and individuals to save money and prepare for the projected college costs, a right of passage that almost all parents want their children to achieve. Parents are very eager and motivated to save more for their kids so that they can go to a good school and can also afford to travel. Even if children are not going to college, parents are still saving for their future.
529 Plan has been in Illinois for about twenty years and is growing by the day. They come in many different investment options, all of which have different management fees.
You must also understand that any money that you invest must not get mixed with your other funds, especially with your personal funds. Any plan that does not give you this option can be expensive in the long run. Therefore, maintain a separate account, with the money that you have set aside for your children’s college education. Do not make the mistake of using their education funds to pay for car payments or personal bills. You must not risk having them spend money on something that they have not planned for at all.
Bright Start College Savings
The Bright Start College Savings Plan is offered by Preeminent, the manager, and guaranteed by the Illinois Prepaid Tuition Fund.
The Bright Start College Savings Plan is an excellent choice for the Illinois resident who’s looking to save for college. You can open a Bright Start account when your child is just an infant, and you can open an account for your child’s future sibling, as well.
Plans can be set up with a single owner or joint ownership. If your child has multiple children you want to save for, a 529 college savings plan is ideal.
The Bright Start Plan has a star rating of four out of five stars from Morningstar. It offers several investment options including mutual funds, bond, and money market options. It is an excellent choice for younger parents who want to get a head start on saving for their children’s college education.
As you’re saving for your child’s future, another important thing to consider is determining how much you will need to save for qualified higher education expenses to cover that portion of your child’s total education expenses.
The U.S. Department of Education and the Internal Revenue Service recommend that parents and grandparents save at least the cost of in-state tuition at a public university.
Bright Directions 529 Plan
The Bright Directions 529 Plan is managed by TIAA-CREF and offers a variety of investment options to help you set aside money for your child’s future. 529 plans are savings plans that allow money to earn tax free interest over time.
Earnings are not subject to federal income tax when used to pay for qualified education expenses. These expenses can include tuition, room and board, textbooks, and certain other expenses. If investment earnings are left to accumulate and you withdraw them in a later year, they’ll be subject to federal tax and a 10% penalty.
With the TIAA-CREF Bright Directions 529 Plan, investors can choose between nine different investment options for their portfolio. These include a variable investment (variable, or balanced, invests in a mix of stocks and bonds), equity investments (which invests solely in stocks), and fixed investment options (which invests in government and corporate bonds).
You can also choose to use age-based portfolios. These capture allocations in line with the stock market performance of your particular age group, offering more conservative investments for younger savers and more aggressive investments as you age.
College Illinois- Prepaid Tuition Plans
529 College Savings Plans are government sanctioned investment accounts that are offered in every state of the U.S. for people looking to save for education expenses. 529 Plans offer a number of benefits including tax incentives that are designed to encourage saving for a child’s education. For families with children in Illinois, the Illinois Prepaid College Tuition Program might be right for you.
The Illinois Prepaid College Tuition Program is administered by the Illinois Student Assistance Commission, a commission appointed by the Governor. The program’s Web site states that it was created because Illinois’s state leaders recognized that “the cost of a college education is skyrocketing” and knew that “seniors were the largest group of people in America who had the potential to benefit” from a prepaid tuition program.
The program lets you prepay tuition costs for any eligible college or university in any Illinois public college or university system, or any eligible out-of-state college and university. Most private institutions in Illinois are covered by the program, although you have to check with the specific institution because it’s up to the higher education institution to decide whether to participate in the program, and there are a few that don’t.
Out of State Plans
529 plans are designed to help parents and grandparents save and invest for college for a child or grandchild. The money in a 529 plan can be used toward any college or career school expense, whether you attend a two-year, four-year or graduate school. You can use the funds to pay for tuition, books, and fees and to purchase computers, software, and the like. Also, while you’re in college, you can use the funds to pay for room and board, transportation, and personal expenses. (However, the growth on the investment earnings are taxable and will be subject to a 10 percent tax penalty if the account owner is not a designated beneficiary.
Your state’s 529 plan (which is operated by a state or a financial services company, such as Fidelity Investments, Vanguard, T. Rowe Price or TIAA-CREF) allows you to save through an Easy Account that allows savings at pre-selected intervals with automatic transfers from your bank account or credit card. The money goes into your plan at the end of the month and grows without taxation until you withdraw the funds…or you can invest more at any time. The 529 withdrawals are virtually tax-free, and you usually don’t need to use your own tax-qualified education accounts first.