Apr 30, 2009 3:54 pm US/Pacific
529 Investment Plans
(CBS13)
Question: I have money set aside for my 16 year old son's college education. Since I'm going to be using the money in the next few years I want a very safe investment. I've heard of 529 plans, are there any available that would allow me to invest in insured certificates of deposit? I also have a 18-year-old college freshman, does it make sense to open a 529 to cover his cost over the next three years?
- Mike R.
Answer: There are several different safe options when looking at 529 plans. Several states have 529 plans that offer CD investments within them. The plans that I would review are the Ohio College Advantage plan, Arizona, Montana, and Minnesota 529 plans. Remember, you can choose from any of those plans, as you do not need to be a resident of a particular state to participate in that state plan. Choose the plan that gives you the most flexibility given your stated time horizon. I think it could make sense for both children depending on the rates that those plans are currently offering relative to what you can buy a CD at your local financial institution. Once you have the rates, you can compare the tax free rate that the 529 plan will provide against the taxable rate the local CD may provide.
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