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HARVARD, YALE, OR YOUR LOCAL COMMUNITY COLLEGE

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you have 60 days to put the money back into a 529, plan without incurring any taxes. However, the government does allow for rollovers of 529s, as long as it done no more than once a year. It used to be that if you were rolling over a 529 you had to change the bene- ficiary of the account. That is no longer the case. Now, when you roll over the account, you can retain the same beneficiary each time.

WHICH IS THE BEST OPTION?

Certainly, the case for any type of savings can be made. While there isn’t one perfect plan for everyone, the 529 comes closer than any other type of account. Since each individual state has its own pro- gram and money managers, it’s vital to check out the different types of plans to make sure that you are investing in the one that best suits your needs. The easiest way to do this is to ask your advisor, rather than trying to investigate all the different plans.

A college education continues to be one of the most expensive things to pay for. The rising costs are outpacing both cost of living and inflation. In fact, according to the College Board, a nonprofit educational organization, the average cost of college for the 2000–2001 school year was $9229. This was for a student who attended a public college and includes tuition, room and board, fees, and books. (See Figure 9.1 for a breakdown of the percentages for each category.) For a student attending a private university, these same costs jumped to $24,946. For a four-year stay at a private school, at those amounts and with no inflation, the total amount is a whopping $99,784!

Put simply, 529 plans offer the tax-deferred growth and tax-free distributions that benefit any student. Anyone, at any income, can contribute to them; and they have flexible contribution limits so that the beneficiary may receive up to 25 times the amount he or she would with an educational IRA, and 5 times as much as he could with a regular or UTMA/UGMA account.

However, for those investors who are in the lower tax brackets, the education IRA is also a fine means of complementing the 529 plan. You would retain more control over the money and the securi- ties it’s invested in, plus the ability to switch between investments

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