A California College Savings Plan Provides for the Future

If considering a 529 college savings plan in California, there are two options to choose from. One plan features traditional concepts and is called the ScholarShare College Savings Plan. The other plan must be purchased through a financial advisor and is called the ScholarShare Advisor College Savings Plan.

The traditional plan enables one to invest monies now and enjoy several tax benefits after withdrawing when one actually incurs college expenses. This plan can be purchased without the assistance of a financial advisor. One can open this account with $50 and contributions can be as low as $15 per month. The maximum dollar amount that this type of account allows over its lifetime is $350,000. Typically, this maximum lifetime limit is increased frequently, so the likelihood that this amount will remain the same over a long-term period is not absolute. Participants that live out of state enjoy the same tax benefits as those that live in the state of California. That being said, this college savings plan is available to residents throughout the United States; one does not have to reside in California in order to take advantage of either of these 529 plans.

The second plan is the type which one purchases through a financial advisor. It carries many of the benefits of the traditional type, with a few exceptions. Accounts may be opened with a minimum of $1,000 and contributions can be as low as $50 per month. At this time, the maximum amount that one can invest in this type of account over its lifetime is $350,000. As with the type stated above, residents that reside across the United States can open an account and enjoy the federal tax benefits that come along with it. The one unique feature of this 529 plan account is that it offers a credit card reward program.

The California ScholarShare plan is said to have an estimated $4.4 billion invested across an estimated 291,000 accounts. Meaning that almost 300,000 residents and non-residents of California have invested a cumulative amount of roughly $4.4 billion that will be applied toward future college expenses.

Accountholders are free to invest in stocks, money market mutual funds and bonds. Any gains realized are not subjected to federal taxes as long as the funds are being applied to college expenses like tuition, room or board. Gains are equally exempt from California’s income tax. Parents and loved ones certainly have two wholesome options for investing in future education expenses.

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