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Facts About Michigan's 529 Plans

By    |   Tuesday, 19 May 2015 04:12 PM

Analysts say one of the best financial decisions a parent can make when saving for their children's college education is to open a 529 plan. The investors can deposit money into an account that they don't have to micromanage and then withdraw the money and all of its earnings tax-free as long as all of that money is used for schooling.

Although President Barack Obama floated a proposal during the 2015 State of the Union to tax the 529 plans, he discarded the idea after receiving plenty of blowback. Here are five facts about Michigan's 529 plans.

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1. Michigan offers three plans – a direct-sold plan called the Michigan Education Savings Program, an advisor-sold plan called the MI 529 Advisor plan, and a prepaid tuition program for Michigan beneficiaries called Michigan Education Trust. According to the Michigan Education Savings Program website, the prepaid tuition program locks in today's prices for tuition and mandatory fees at Michigan public colleges. The direct-sold plan and the prepaid tuition program can be used together.

2. Contributions to Michigan's 529 plans are tax deductible. According to U.S. News & World Report, donors can deduct up to $5,000 for those who file taxes as a single person and up to $10,000 for joint filers. But those tax breaks don't transfer to out-of-state plans. "Some people are relatively quick to give up their state tax benefits and go to another plan," Laura Pavlenko Lutton of investment research firm Morningstar told the Detroit Free Press in 2013. "Carefully assess what those tax benefits are before you leave the state."

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3. The minimum initial contribution to the direct-sold and advisor-sold plans is $25 per portfolio. The total asset-based fee for the direct-sold plan ranges from 0.20 percent to 0.30 percent, and the program management fee is 0.08 percent, U.S. News & World Report noted. For the advisor-sold plan, the program management fee is 0.5 percent with expenses for investments ranging from 0.07 percent to 1.01 percent along with an initial sales charge ranging from 2 percent to 4.5 percent. The maximum contribution limit for any Michigan plan is $235,000 total.

4. Michigan and Florida were the first two states to offer the prepaid tuition plan where parents can pay for future college costs at the current-day tuition prices. Both states introduced the option in 1988.

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Analysts say one of the best financial decisions a parent can make when saving for their children's college education is to open a 529 plan.
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2015-12-19
Tuesday, 19 May 2015 04:12 PM
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