If you plan on sending your kids to college, you should be aware of the existence of the 529 savings plan, which is a very good way to save for your kids’ future. The 529 college savings plan investment option available to any college or university in the country.

A lot of parents aren’t sure whether or not the 529 is the best choice but a calculator should be able to help you determine that. You can compare your estimated earnings in a normal account with what you could potentially earn under a 529 plan. Depending on how time you are allotted before the college years, you are subject to come ahead with the 529 college savings plan.

Weigh your options

Before you start to use a plan estimator, there are some things you probably should think about. The first thing is that a lot of calculators will are only designed to work with college savings plans. So what you should do is consider a prepaid tuition plan only if you know for a fact that the person who benefits from the plan is definitely going to go to a 529 friendly school. the 529 guarantees rates for our future and withdrawing from your prepaid plans are tax-free.

Federally tax free withdrawals for qualifying general college cost with the 529 are seen as gifts for taxes. This is applicable for annual contributions not greater that the amount of 12k for individuals, but couples can have up to 24,000 provided they make joined contributions. Also, you can make a large payment equal to five years of contributions which would be 60,000 dollars for individuals or 120,000 dollars for married couples.

You should remember that you must establish a new plan for each of your offspring but remember limits would apply to the accounts individually.

Gains related to your investments that you get from your 529 can be subjected to the lower capital gains rate, if held for more than one year. Also applying for qualified dividends. But short-term gains as well as interest are taxed at your regular tax rate.

How the tax savings calculator works

As a rule, most tax savings calculators will ask for the following information: the years left until the child enters college, the rate you estimate surrounding college funds if for some reason invested in a taxable account rather than a 529 plan, Regardless of whether you make one large payment or smaller payments and the years you plan to contribute and the return expected.

Results will give the value at college age, presumed after-tax value at college age as well as the amount you’ll have and percentage gained from the 529.

Ultimately, estimates are only… – estimates so you’ll be clueless as to the exact amount until you start the investment process. But reading and preparing yourself before picking a plan will help you to know what to pick.

The more you know the better decisions you can make, like the topic of Prepaid College 529. Join us Prepaid Tuition 529.