Last Chance to Make Your 529 Plan Contribution for 2008 By Thomas P. DiNapoli
With costs of almost everything increasing and incomes remaining flat or declining, families are looking for ways to save money. One easy way to stretch some of your hard-earned money while investing in the future is by making year-end contributions to New York’s 529 college savings plan.
Contributions to the state’s 529 plan are tax-deductible for New York State residents while future withdrawals are exempt from federal income tax as long as the money is used for qualifying educational expenses. However, you must contribute to the plan by December 31 in order to qualify for the deduction on your 2008 New York State taxes.
Right now may not seem like the best time to invest money in the stock market, but depending on your individual circumstances, the flexibility of New York’s program offers some appealing investment options.
For those with young children, you could be looking at an investment horizon of fifteen years or more. While investing more aggressively in stocks exposes you to more risk, it also gives you an opportunity to buy more shares at a lower cost. Those who buy stocks now, while the market is down, are in a better position to benefit from future upturns.
For those with a shorter investment horizon or for those who simply wish to avoid the risks associated with stocks, New York’s plan has 12 individual portfolios, and you can select up to five investment options per account. The most conservative portfolio returned approximately 3 percent this year, which is not bad considering the markets have been down as much as 40 percent.
And, if you’re not happy with the investment options you’ve chosen, you’re allowed to make changes to your portfolio once per year.
As families take stock of their finances, I encourage everyone to look closely at New York’s 529 plan. Every dime counts during this economic downturn and the benefits of the 529 program could help you save some money now, while helping you reduce your college tuition costs in the future.
Thomas P. DiNapoli is the New York State Comptroller.