The Parents Answer To Saving For Their Childs Education, T HE DRIP "529" Alternative

As the cost of college continues to rise faster than inflation, Direct Investment Plans (DRIPS) can provide a valuable alternative to 529 plans for education funding. An analysis of the relative merits of DRIPs indicates that one is likely to end up with the same or more after-tax money available to fund their childs or grandchilds education - - without subjecting oneself to onerous tax penalties in the event that tax-free withdrawals are not allowed beyond 2010 and 100% of the funds are not used for college.

(PRWEB) March 26, 2004 -- As the cost of college continues to rise faster than inflation, Direct Investment Plans (DRIPS) can provide a valuable alternative to 529 plans for education funding. An analysis of the relative merits of DRIPs indicates that one is likely to end up with the same or more after-tax money available to fund their childs or grandchilds education - - without subjecting oneself to onerous tax penalties in the event that tax-free withdrawals are not allowed beyond 2010 and 100% of the funds are not used for college.

DRIPs are not subject to penalties if the funds are not utilized for college. Under a 529 plan, the account owner is subject to full taxation and a 10% penalty to reclaim the funds on any gains in excess of the amount needed for college. This translates to a 40% tax rate on the gains. Since it is difficult to predict whether a child will attend private or state school 18 years into the future, or whether he or she will receive scholarship funds, the right" amount of funding needed for college expenses is difficult to assess. A 40% tax penalty on an unpredictable" sum of funds presents a large risk to the investor.

In an article that appeared in the Wall Street Journal yesterday, Securities and Exchange Commission Chairman William Donaldson stated the agency will form a task force to look into 529 plans to examine whether investors are getting enough information on fees and expenses". House Financial Services Committee Chairman Michael Oxley (R.,Ohio) expressed concerns about numerous issues with 529 plans, (including)..."whether high costs and fees overtake the family tax advantages intended by Congress." Annette Nazareth, the SECs Director of Market Regulation wrote that fees associated with 529 plans include enrollment or application fees, annual account maintenance fees and are in addition to the fees of the investment companies in which the 529 plan invest."

The DRIP approach allows the account owner to remain in control and have complete discretion on how to spend the funds. The money can be used for purposes other than college education, such as summer camp or private elementary or high school.

Steve Vizner of Monroe, Connecticut has used DRIPs to help plan alternative funding for his grandchildren. I found that by using DRIPs and adopting a long-term buy-and-hold policy to hold down costs, even with the DRIP accounts in my name, I had the same after tax money. I like the DRIP approach better because you remain in control. You can use the money for purposes other than college education. In fact, the grandparent (in my case) has complete discretion as to how to spend the funds."

By funding such a portfolio on a regular basis over the next 18 years, an investor can create ample funds to pay for the higher education of their offspring. Moneypapers DRIP (Sample) 529 Portfolio consists of:
• ALLTEL, a telecom company, which has increased its dividend 240% since 1986.

• Anheuser-Busch, the major beverage and entertainment company, which has increased its dividend 633% since 1986.

• Bank of America, one of the largest banks in the United States, which has increased its dividend 742% since 1986.

• ConAgra, the huge commercial and consumer food company, which has increased its dividend 836% since 1986.

For more information about the 529 Alternative", please visit http://www.moneypaper.com or call 800-388-9993.