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Thursday, November 14, 2019
Higher Education Savings Plans Essay -- essays research papers
Higher Education Savings Plans Abstract      This paper is about the Section 529 higher education savings plans that allow family members to receive certain tax breaks while investing for a child’s higher education. The data used in this study is the historical rate of return on a Connecticut 529 plan versus the benchmark, the S&P 500. The time period covered was the inception of this plan starting in 2002 up to the start of research on this study, the end of September, 2004. The tests show that although this particular 529 plan offers tax benefits that could help in investing for higher education, that this particular plan failed to outperform the market during the period observed. Therefore it is my conclusion that there are better investment options on the market to invest in a child’s higher education than this Connecticut 529 savings plan. This study may lead to further observation of other Connecticut 529 plans as well as 529 plans managed nationwide to figure out if 529 plans are as effe ctive as advertised. â€Å"529†college plans have become greatly debated in recent years as a tool for investing for college. The plan, which takes its name for the provision of the tax code that sanctioned them, is a college savings account which allows parents or grandparents to give gifts to children that will be later used to obtain a college education. Although some 529 plans have been around since 1988, the Economic Growth and Tax Relief Reconciliation Act of 2001 made sweeping changes to Section 529, most of which became effective in 2002. These changes offer substantial tax benefits to families seeking to finance the cost of college expenses. 529 plans offer families, regardless of income, the opportunity to generate tax-free earnings on funds specially set aside for higher education. These plans, which are run by individual states, can be of great benefit to children by allowing their family members to give money to them in advance to save for college. It can also be detrimental to not o nly the people who invest but the children who are receiving these gifts. I became aware of these 529 plans by reading â€Å"A Random Walk Down Wall Street†by Burton Malkiel. My motivation was to see if these 529 college saving plans are as effective as advertised and to look at the upsides and downsides of investing in them. Since there are tax deduct... ...  881.69     935.11     840.31     855.7     -2.74%                    2-Dec-02     941.55     954.4     869.42     879.82     -6.03%                    1-Nov-02     885.76     941.85     872.02     936.31     5.71%                    1-Oct-02     816.3     907.49     768.58     885.77                        Â
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