529 College Savings Plan
An account into which persons deposit funds to save for university-related expenses. The funds in a 529 college savings account are tax-deferred and, if used directly to pay for college, tax exempt at the federal level. They are sometimes exempt at the state level as well. The plan exists in an attempt to make post-secondary education more affordable. See also: IRA, 401(k).
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A plan that allows individuals to set aside money in a special account designed to pay for future college expenses. Funds in the account grow tax-deferred, and withdrawals used for college expenses are exempt from federal income taxes. Parents are permitted to change from one state plan to another once a year with no penalty. Many states also offer tax incentives for these plans. Also called 529 plan.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.