Saving for College: About 529 Plans

As the cost of college continues to rise annually above the rate of inflation, higher than the annual Cost of Living Adjustment (COLA) and faster than the Consumer Price Index (CPI), parents are learning to fight back by establishing 529 college savings plans for their children. These tax shelters have grown enormously in popularity, especially in states like New York where residents have a state income tax to pay in addition to their federal income tax.

Besides the state income tax savings that 529 plans provide, parents do not have to pay income tax on the interest earned by these accounts.

The growth in popularity of 529 plans has been nothing short of amazing. The amount of money nationwide in 529 plans at the end of September 2014 was $203.7 billion, a 20.6% increase from just one year earlier! There are now almost nine million American homes with 529 savings plans. That means that more than 15 percent of all U.S. homes with children under the age of 18 have college savings plans.

The evidence that these accounts are important in the face of rising education costs is undeniable. The Consumer Price Index rose 58 percent between 1997 and 2014. The cost of four years of public college tuition rose almost 80 percent during that same time period!

The message from information like this is clear. Parents who want to do the best thing possible to help their children get a college education should open a 529 college savings plan. There is more information on 529 college savings plans at UnionPlus.org and you can enroll in a plan in New York State by visiting the NYsaves.org website.

We would also like to remind members that besides having a good explanation of 529 college savings plans UnionPlus.org has other valuable information for both students and their parents regarding ways to finance post-secondary education.