A college degree ensures a bright future for your children. At present, a four-year degree course at a public institution costs around $40,000, and $100,000 at a private university. Approximately, a newborn will have to pay $120,000 for his/her college education at a public university and $330,000 at a private institution.

With college education costs exponentially increasing, 529 college savings plans are a great sell. What are the benefits of 529 plans?

Federal tax benefits

One of the benefits of 529 plans is that they provide you with unsurpassed income tax breaks. Your investments are tax-deferred and your distributions to pay for your beneficiary’s higher education costs are tax-free federally. The 2006 Pension Protection Act made the tax-free treatment permanent.

State tax benefits

Aside from the federal treatment, your state may provide you with some tax breaks. Do your research and find out what benefits your state gives to its residents for investing in the state’s 529 plan.

If your state doesn’t give any benefit in this regard, you can pick a 529 plan on offer. The next thing to do is to compare 529 plan features.

Low maintenance

Another benefit of a 529 plan is that it can give you an easy hands-off means to save for higher education. Once you choose a 529 plan, you fill out an enrollment form and then make your contribution.

After this, you can now relax. Your plan, not you, handles the current investment of your account. The treasurer’s office of your state professionally manages plan assets. They can also be managed by an outside investment company (program manager).

The donor controls the funds

The donor (it’s you) have all the rights to the account. With only few exceptions, your beneficiary has no control over the funds.

The donor is the only one who calls all the shots. You’re the one who decides when to take withdrawals and for what purpose. Some 529 plans even let you reclaim the investment for yourself anytime you want. No questions asked.

Flexibility

529 plans are flexible. You can move your investment by changing to a different alternative in a 529 plan each year (program permitting).

There’s no federal limit about the regularity of these changes if the account beneficiary is replaced with another family member who meets the requirements at the same time.

Each 529 plan has different rules about the number of changes you’re allowed to make, so make sure to compare the features of each plans.