I just downloaded an article on how the Florida Legislature is eyeing the PREPAID 529 Plan to fill in their budget shortfall! Get your copy here: CLICK FOR ARTICLE.
If you are unfamiliar with 529 Plans, there are two generic types: Prepaid and Savings.
SAVINGS: Most families are familiar with the savings plan which is a lot like an IRA or 401(k). You put money into a fund managed by a financial company and pick types of accounts, mutual funds or a CD. These funds respond to market forces and can grow - or as we have seen in the market meltdown - decrease! The key for a savings 529 Plan is there is no specific relationship to the cost of college, you are simply saving money in an account dedicated to college. You HOPE you get growth close to the inflation in college prices (sadly, most don't). The sole benefit to using this kind of 529 Plan is the growth MAY be used tax-free if used for properly Adjusted Qualified Higher Education Expenses (AQHEE).
PREPAID COLLEGE SAVINGS: Prepaid plans are much rarer because where you put money into an account and it is guaranteed to keep up with college inflation. You are literally prepaying college costs. There is no chance of losing money because it is a prepayment of college expenses and NOT an investment exposed to the markets.
Now there is a REAL risk that money may "evaporate" from this supposedly safe program in the state of Florida. Your opinion of a potential grab of SAVINGS that were promised to be there for college use by the families who trusted this program? To me this is a scary road where the legislature uses your money for their pet programs leaving behind IOU's.
What do you think of this idea?
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