Drawbacks of 529 College Savings Plan

Actually, 529 College Savings Plan is an exceptional tool to encourage parents in America to save for the future higher education expenses of their children or to a designated beneficiary.

In this economy, we have seen many people liquidating their 529 savings accounts to pay everyday living expenses. This certainly can be heart breaking but fortunately it is quite easy to do and the tax implications and penalties may not be as bad as you think they will be.

Nowadays, many are aware that 529 college savings plan is a wonderful way to begin saving for your child’s education and, every US state has already at least one 529 plan available. However, there are still some drawbacks of 529 college savings.

Although financial experts predict that congress will extend the 529 plan tax breaks, you will end up owing capital gains taxes on the earning if it does not.

Besides, expenses and fees is a confused problem. In fact, these can be seen as the biggest drawback to any fund investment. The dreaded fees and expenses you just can’t seem get away from. Just so you know every plan has a fee embedded somewhere. And that is how the investment manager makes their money. You will have to pay management fees on your account which can eat into your earnings.

Not only that, investment control is one of the negative aspects of 529 college savings plan. As the choices you have for investing your 529 account funds are determined by the plan’s investment manager. But on the bright side, a lot of states these days are now broadening their investment options and offering a wider range of goals and risk levels.