Question: Do 529 plans include both college savings plans and prepaid tuition plans?

Answer :

Yes. Although most people associate 529 plans only with college savings plans (sometimes called college savings programs), prepaid tuition plans are another type of 529 plan. And though the two share some similarities, college savings plans and prepaid tuition plans differ in important ways (e.g., a prepaid tuition plan offers a guaranteed minimum rate of return, while a college savings plan does not). Make sure that you understand what type of 529 plan you're investing in. Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.