Investing in a 529 college savings plan is a powerful strategy that families can use to make paying for their children's higher education a little easier.
Described by CollegeSavings.org as "a tax-advantaged investment plan designed to encourage saving for future higher education expenses of a designated beneficiary," the 529 plan enables families to invest money now in relatively small amounts that will grow over the years and reap much larger rewards later when they are ready to pay for college.
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Plan funds that are withdrawn for authorized educational expenses are exempt from federal income tax. Many states grant tax exemptions in their own plans as well, but because Alaska does not have a state income tax there is no exemption to grant.
Alaska offers three 529 plans. The T. Rowe Price College Savings Plan and the University of Alaska College Savings Plan are both purchased directly and managed by T. Rowe Price. The John Hancock Freedom 529 plan is a joint effort between John Hancock and T. Rowe Price that is purchased through a broker, giving participants the benefit of a professional's expertise.
The T. Rowe Price College Savings Plan and the University of Alaska College Savings Plan are quite similar in their offerings. The University of Alaska plan, however, contains an additional investment option called “the ACT Portfolio providing special benefits to future University of Alaska students along with a very low expense ratio,"
according to SavingForCollege.com. Also the University of Alaska 529 plan may qualify beneficiaries to receive a waiver of nonresident tuition surcharges if they live out of state.
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Both of these plans require an initial contribution of $250 and a maximum total per beneficiary of $400,000 in Alaska 529 plans. The T. Rowe Price plan has a $50 minimum monthly contribution per portfolio per month, while the University of Alaska plan has the lower $25 minimum per month.
The John Hancock Freedom 529 plan brings the advantage of professional advice to navigate its 17 investment options. It features mutual funds from T. Rowe Price and multiple other fund companies. The minimum lump sum initial contribution is $1,000 per portfolio, while the minimum automatic monthly amount is $50. The maximum total per beneficiary is $400,000 in Alaska 529 plans.
Alaska's three 529 college savings plans offer well-rated options worth considering in preparation for a child's future higher education expenses.
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