Today is not just Memorial Day, it's National 529 College Savings Plan Day. The problem is that more than two-thirds of investors don't know what those plans can do.
Only 32 percent of people could correctly identify a 529 plan as an option for saving for college expenses, according to a new survey by the investment firm Edward Jones. The 1,009 people polled in mid-May did better than last year's group, which had just 28 percent who understood what these state-sponsored plans did.
These 529 plans offer many tax benefits that are better than using a savings account or, worse, tapping your retirement savings. Investment earnings in a 529 plan are not subject to federal capital gains tax and generally not taxed by state governments when used for qualified education expenses, such as tuition, fees, books, and room and board, of the designated beneficiary.