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How to Set Up a 529 Plan for Your Child

May 24, 2012

A 529 college plan is a way for you to save for your child's education in a tax efficient way. You save your after tax money and it grows tax-deferred. You withdraw the money as you need it when your child enters college. When you withdraw the money for college expenses the amount the money has grown over the years is tax free.

1. You need to establish how much money your child will need for college and determine how much per month you have to save to meet that goal.

2. Contact your states 529 savings plan for information concerning plans, costs, and other requirements. You do not have to use your states college savings plan. You can use other states plans or private brokerage plans.

3. Fill out the appropriate applications for the state 529 plan or the brokerage 529 plan.

4. Have money sent to the plan on a monthly basis or have it withdrawn automatically from your checking account.

5. Choose investments in the plan that are appropriate for your child's age because as the child gets older adjustments to the investments need to be made. Normally more safer and less risky to preserve principle.
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