A Look at Mississippi’s 529 College Plan

What is a 529 plan, and how can it help bring your children closer to their educational goals? As a college savings vehicle, state managed 529 college plans are a relatively new option, and many parent have not yet taken advantage of what they can do for their children.

Here is some information on what you need to know about a 529 college savings plan, including what the state of Mississippi can offer your family in the way of 529 college savings plans.

What Are 529 College Savings Plans, Anyway?

The development of 529 college savings plans are relatively new, although most states now have some kind of 529 plan in place. A 529 college savings plan is essentially a special state managed college savings incentive program. The 529 plans were put in place to help parents save money for their college education. There are many things to take into consideration before you begin to invest in your state’s 529 college savings program.

When You Choose a 529 College Savings Plan . . .

Most importantly perhaps, you should keep in consideration the amount of time that your money will be invested in the 529 college savings plan. Other important factors to consider includes you family’s income tax bracket, the fees and charges that are loaded into the plan, the type of fees that are involved, the amount that you will be investing, and they types of income tax deductions that may be available to you if you open a 529 savings plan. Be on the look-out for fees. Even a small difference in fees can make a substantial difference.

Other Important Considerations

When you have decided that a 529 state savings plan is right for your family, you will find that there are still other considerations to be made. One of the most prominent features you will want to focus on is the state tax benefits that may accompany the 529 plan you are considering. Ask about the kind of special tax benefits that will be offered to you as a result of investing in a specific 529 plan. Will your state allow deductions of all or part of your earned interest?

The Mississippi 529 Plans – The MACS Option

The state of Mississippi offers two options that allow you to save for college. Families can choose to invest in either of these section 529 plans, or both of the plans if they so wish. Both of these plans were designed to help families save and plan for their children’s higher education opportunities and expenses. The first plan is known as the Mississippi Affordable College Savings Program, also known as MACS.

The MACS program lets families save for all qualified expenses. Under this section 529 savings plan, qualified expenses refer to tuition rates, fees, room and board expenses, and books. While you don’t have to be a resident of Mississippi to take advantage of the MACS program, Mississippi taxpayers can receive up to $10,000 in state tax deductions.

Your Second Option – The Mississippi Prepaid Affordable College Tuition Program (MPACT)

The MPACT program is described as a prepaid college tuition program. It allows families to pay full tuition along with mandatory fees at any public institution of higher learning in the state of Mississippi without having to worry about the rising costs of education.

In effect, parents can pay the current cost of tuition so that it will be paid off while their students reach college age. However, the MPACT program only covers tuition rates. It does not cover the expenses associated with room and board, books, transportation, or other college related costs.

An Overview On The Top Three States With The Best 529 College Plans

Everyone knows when you are talking about savings plans no plan has everything that you want. Some states plans are better in some areas than others. It's just how they are made up. Most states will let you choose what accounts that you invest in directly.

This really helps you if you’re good at investing. If not, maybe you should leave that up to an expert than. So, which states have the best plans? It all depends where you looking and what you want out of them. If you were looking to save money on fees than your best bet would be to go with the Utah Educational Savings Plan Trust.

This plan has a portfolio of nine-index funds that charge only 0.38% per year. This plan also only charges 4.00 per 1,000 of your account balance. If you’re looking to save money on fees than this is probably your best option. Toss in the tax breaks you can also get and it makes perfect sense.

For the conservative investor the plan that Michigan has in place will definitely help you save money. The Michigan Educational Savings program is perfect for the investor who doesn't really want to take a chance of putting his money in the stock market. This plan has a savings option that guarantees the principal and a minimum annual interest rate based on a treasury note.

This plan is titled more towards bond funds than most 529 plans. It also has low fees that make it ideal for the investor who doesn't like to take a lot of chances with his money. Probably overall the best plan as a whole belongs to the state of Virginia. Their plan is more for the investor who fills comfortable putting their trust into an advisor.

Virginia College America Plan will cost you more if you use an advisor, but in the long run it will be worth it. They can craft a portfolio with 22 top-notch funds from American Funds. Many people are using this plan as you can set it and just watch the investment grow. It seems many Americans have less time and this in an option they love.

The overview on 529 college plans is really straight forward as no one has the total answer. Many states have great plans in place while others are not so good. It depends a lot on what kind of plan you are looking for and how you would like the money invested.

Some investors choose to take the stock market while others love the bonds and mutual funds. Each plan has its pluses and minuses just like anything else. More of the 529 plans in each state are affiliated with a top investment firm so you know your money will be invested with the highest regard for getting you the most from it.

As like any investment many factors will come into play. Such as taxes and what the state will allow under their different plans. Many states try to craft their plans to be the best this is why they are always changing. One of the most asked questions is: are you stuck with your own state plans? That's a tricky question, as many states will let you use their plan even if you don't live there.

Some won't so check to make sure before you invest any money at all. 529 college plans vary greatly so take your time and do your research into which state fits your needs the best. After you are done you will probably find out more than one state will do the job for you.

What Contributing Grandparents need to know about 529’s

What exactly should grandparents need to know about 529 college plans? Some things just seem to go together like hot dogs and baseball, peanut butter and jelly, and of course, grandparents and 529 plans.

It’s a very lucky family that can depend upon grandma and grandpa to help with college tuition bills. College expenses aren’t exactly shrinking. The best gift that anyone could give could be your grandchild’s education fund and a 529 plan is a great way to get started.

A 529 plan is a state sponsored savings plan that invests money on behalf of beneficiaries. The earnings are tax deferred from federal income tax and most states have programs that will defer state taxes. If your grandchild uses the money from this fund for any qualified education purpose, the withdrawals will be free of tax.

Grandparents are allowed to contribute up to $11,000 per year per grandchild. So if Grandpa and Grandma have two grandchildren could place up to $44,000 in funds for the grandchildren without any gift tax liability. The grandparents would each have to set up 2 funds for each grandchild (a total of 4).

Grandparents will still have control over these funds and can retrieve the money if needed. Of course, there will be taxes and penalties on an unqualified withdrawal but the taxes and penalties will only be on your earnings, not on the amount of the original contribution.

The 529 plans have lots of investment options, which create a big decision for the grandparents to make. Grandparents typically are more conservative than the child’s parents. The most popular approach to 529 investments tends to be the age-based option. This is a simple way to save for college. You do not have to personally adjust your allocations over time.

The fund is managed according to the age of your grandchild. Younger children have more of a stock concentration. As your child gets older, the assets are automatically shifted into a higher ratio of short-term investments and more stable bonds.

Grandparents could also check and see if the 529 plan that your have set up will accept a third party contributions. This will take all of the worry about opening and maintaining your own accounts. State tax deductibility may be an issue if you go this route. Some states allow you a deduction for at least part of your contribution to their 529 plans. As a third party donor you will not be eligible for this deduction.

If you ever need to apply for Medicaid benefits, the state will look at your 529 plans as countable assets. You are eligible to take back the money you’ve invested so the money is technically available to pay medical or nursing home expenses. If you have this concern, it is an issue to discuss with your tax professional or attorney. It might be a good idea to make someone else the owner of the fund.

A big concern for grandparents is what would happen to the money in the 529 accounts if your grandchild chooses not to attend college. A great option is to change the beneficiary to another family member or even yourself. You can change the beneficiary as much as you want.

Another option is to take the money in the fund for your needs. The earnings in the account will be subject to a 10% penalty rate and will be taxable as income.  This is some of what contributing grandparents need to know about 529’s. It is a great way to invest in your grandchild’s future. You have picked an incredible gift to give to your very lucky grandchild.

Keeping Track of your 529 College Plan Contributions

There are several reasons that it’s important to keep track of your 529 college plan contributions. When investing in a pre-paid 529 college plan account overpayment means money that parents won’t be able to withdraw or to use if the student doesn’t need it or ends up not going to college.

When investing in a non pre-paid 529 college savings account it’s important to keep track of your investment contributions because that money may be subject to an income tax deduction in the state you live in.

This is important for any family member who is contributing to the child’s 529 college savings fund, and anyone in the family can contribute money to the college savings fund although the contribution may not be tax deductible in all states.

Keeping track of your contributions to a child’s 529 college savings account is also important so that you can keep track of how much money has been invested, if the investment is growing fast enough and what the rate of growth is. After all, that account is very important to the family because the child’s future education depends on it.

The money that parents or other family members contribute to a 529 college savings account is considered to be a gift and as a gift that money qualifies in the tax code as part of the annual $11,000 gift tax exclusion. So, any family member can contribute up to $11,000 annually without any taxes being applied to that money.

According to the current Federal gift tax law, parents and family members can give up to five years' worth of financial gifts, so a total of $55,000, in one year with no tax penalties, however that person would not be able to contribute any money to the account for four years following that year.

Making a large contribution makes a lot of sense whenever a parent or family member can afford it because the interest on such a large payment would accrue faster and in greater amounts than interest on smaller payments, even if there were lots of smaller payments made during the year.

If you have a personal banker or investment professional who takes care of the household’s investments make sure that the investment professional gives you a detailed accounting of all the contributions made to the non pre-paid 529 college savings account every quarter or every month and keeps you advised of important matters pertaining to the account.

The best way to make sure the investment is doing well is to monitor it yourself, but many people find investing confusing and prefer to leave their investments to be managed by a professional.

When tax time comes around, be sure to document all your contributions to the child’s 529 college savings program if your state allows tax deductions on that money to make sure that those deductions are applied to your taxes.

Keeping track of your 529 college plan contributions also means staying on top of the latest developments in the laws regarding 529 college savings plans. Make sure to stay on top of any changes in the laws regarding 529 college plans to make sure that you don’t end up losing money.

While a non pre-paid 529 college savings plan has a relatively moderate risk level, there is still some risk and it’s best to monitor the contributions and management of the 529 college savings plan closely to make sure that the investment is still performing well and growing under the asset company’s management.

Be sure to address any questions about the contributions to or the performance of the 529 college savings account to the asset management company chosen by the state to administer the account rather than to the state itself because the state is not involved in the direct management of the 529 college savings fund.

The Medicaid-529 College Plan Debate

Medicaid can really put a dent into your college plans for your children and grandchildren if your not careful. People sometimes don't realize what the law states and are losing their 529 college funds that grandma and grandpa save unselfishly so they could have a college education.

How does this happen and what can you do to stop this in it's tracks? Now you would expect that your investment in these 529 college plans would be safe and earmarked for your grandchildren of kid's college education, but not so fast.

If you get sick and needed extensive stay in the hospital or nursing home and the insurance runs out. Then Medicaid is supposed to kick in. Well, that's a yes and no answer. If you have any funds that can be used first you must use those such as a home or money that you have available.

This includes the 520 college savings plan that you saved for your grandchildren. Once those funds are depleted and only then will Medicaid kick in. This means all the savings and hard work you did for your grandchildren can be wipeout very quickly. People sometimes think this will never happen to them, but it's a reality of today's life that everyone should consider.

No one can predict how your life will end up and being prepared is probably the best thing you can do. Long term care insurance is the key here. More people are starting to realize that investing in long term care insurance is a solution that makes perfect sense.

You never know what the future holds and getting this insurance is a great stop gap measure to make sure nothing happens to your 529 college plans that you had made for your grandchildren. The biggest problems with the 529 college saving plans is so many plans have been made and this has really caused problems.

Medicaid problems really weren’t figured into the equation and this has just been another problem that they have had to figure out.  Medicaid problems have been around for a while and no one thought they would invade into the 529 college saving plans, but they have.

States are staring to realize this problem and taking steps to see what they can do about it. It's not really fair for someone to lose everything they have because of medical problems. Congress is also taking a long look into these programs as the 529 college saving programs have seen some rapid abuse lately.

The worse part about the Medicaid problem is many people don't even know it exists. They could lose everything and they have no clue. This debate will probably continue for a while until something is figured out about. What's the future hold? Government intervention will be needed if this problem is going to go away anytime soon.

Medicaid has been a bone of contention for a long while with different things. The 529 college savings plans were invented by and administered by the states so basically the ball will be in their court. They regulate each one and it will probably have to come from them if the problem is indeed fixed.

The Medicaid- 529 college savings plan argument will continue for a while until they can figure a fair solution to the problem. Hopefully something can be done and hard earning Americans won't have to pay the price in their golden years for just becoming sick. This problem needs to be taken care of before it grows out of control. That is something no one wants to see happen anytime soon.