This plan is IDeal for college

It may be counterintuitive to discuss family financial information publicly, but I'd like to tell you about our teenager's 529 plan. Named for a section in the Internal Revenue Code, the college savings vehicle is also known as a "qualified tuition plan." Basically, contributions to and earnings from certain state-sponsored education investment accounts enjoy tax advantages, making it a little easier to save for college.

Note I'm not talking about plans offered through brokerage or other firms; this column addresses only Idaho's state-sponsored plan.

It was very easy to set up. Idaho's 529 plan is called "IDeal." At Idsaves.org I entered initial account information including parent (account owner can be grandparent, friend, or any adult) and child/beneficiary's names, addresses, and Social Security numbers. If you prefer mail, forms may be requested from (866) 433-2533. It takes as little as $25 ($75 per quarter) to open an IDeal account.

Next I chose how to allocate risk. From investment options "conservative, moderate, and aggressive," I selected half of one, and 25 percent each of the others. Of course any combination or 100 percent also work; it's entirely up to the account creator. After that I mailed a check to open it (electronic transfers also possible) and logged in online to confirm its receipt. Counting the trip to the mailbox the entire process took 10 minutes.

Now I simply get quarterly statements and make contributions to the account when I can. I can check the balance online whenever I wish. No; I don't have to watch the investments, make regular contributions, or worry about investment decisions. No, she doesn't have to go to college immediately after high school; there is no set limit. No; there is no initial fee for an IDeal account and the annual fee is negligible - less than 1 percent for Idaho residents. The maximum limit per beneficiary is $350,000, not that I'd reach that even in my dreams.

Earnings are tax-free, as long as we leave them in the account. Idaho also allows up to $4,000 ($8,000 for married joint filers) in tax deductions per annum for contributions to 529 plans. When our child goes to college, as long as any withdrawals are spent on tuition, fees, books, certain room and board costs, or course-related computer software (keep receipts) there is no state or federal tax on the withdrawals. If withdrawals are not used for those qualified purposes, income tax plus a federal 10 percent penalty are imposed.

It's never too early or late to start an account for someone (owner and beneficiary can not be the same person). There is no age or income limit. The qualified withdrawals may be used at any higher education institution nationwide, including graduate, undergraduate, two- and four-year institutions, and technical schools. Also if one child decides not to go to school, the beneficiary of a 529/IDeal plan may be changed to another name without tax penalty (state rules/plan types vary).

On Sept. 18 from 5:30 to 7:30 p.m. local time, Idaho Treasurer Ron Crane will host a "College for Kids" question-and-answer session about financing higher education, sponsored by IDeal. The event will occur in Meridian but may be streamed live at http://idahoptv.org/leglive. For more information contact Jace Perry at (208) 332-2940 or visit Idsaves.org/kids.

As much as costs keep rising, we need all the incentives we can get.

Sholeh Patrick is a columnist for the Hagadone News Network. Contact her at [email protected].