South Dakota 529 College Savings Plan

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South Dakota 529 College Savings Plan

With a South Dakota 529 Plan, you are able to save for college and save money on taxes at the same time. Earnings on money deposited into a 529 will grow state and federal tax deferred and when you take a disbursement, the money will be state and federal tax free as long as the money is used for approved college expenses such as tuition, room and board, books, supplies and fees at most colleges, graduate schools and universities. If the money is not used for approved expenses, then withdrawals will be taxed as ordinary income and will also be subject to an addiitional 10% federal tax.

South Dakota 529 Funds offer three types of investments: age-based portfolios, customized portfolios and select fund portfolios. There are five age based choices and money invested here will automatically be reallocated to more conservative funds as the beneficiary grows toward college age.

There are three investment choices available in the customized portfolio: diversified equity, diversified bonds and money market plus. The equity portfolio includes various mutual funds covering pretty much all the bases, large cap value and growth, mid/small value and growth, international equity and fixed income/commodities. The bond portfolio is 100% in fixed income/commodities. The Money MarketPlus portfolio is invested 90% in short term fixed income and cash equivalents and 10% in fixed income/commodities. Once your money is in one of the customized portfolios, it will remain there over time until you decide to move it to something else.

Finally, there are the Select Funds, which are a group of individual mutual funds that you can choose to invest in. Put your money in one fund or diversify into several...the choice is yours. One thing you need to remenber is that investments in the 529 funds are not insured and the value of your investments can rise and fall with the markets. You should also check with a financial advisor and tax advisor to see if a 529 investment is right for you.

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