Question: If I open a 529 account, will my child's choice of college be restricted?

Answer :

It depends on the type of 529 plan you open. There are two types of 529 plans--college savings plans and prepaid tuition plans. With a college savings plan, your child can use the money at any college in the country and abroad that is accredited by the U.S. Department of Education. By contrast, with a prepaid tuition plan, your child will only receive the maximum benefits under the plan if he or she attends one of the colleges in the plan. If your child chooses a different school, you may pay a penalty. 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.