Video: 529 College Savings Plans: Things to Know May 29, 2021
Happy 5/29 Day – a national event celebrating saving for college and the benefits of 529 college savings plans!
This day serves as a great reminder that it’s both easy and attainable to cover future educational expenses if planned for ahead of time.
529 College Savings Plans: Things to Know
Have you thought about saving for your child’s college expenses but don’t know where to start?To find out more about 529 plans or other savings plans, please visit our website or reach out to myself. I’d be happy to help.
While there is more than one way to save for college, for National 529 day, let’s explore 529 College Savings Plans.
529 plans can be a tax efficient way to save for college. They are similar to Roth IRA accounts in that you get tax free growth on assets inside the 529 as long as the funds are used to pay for qualified education expenses such as tuition, fees, and books.
Distributions not used for qualified expenses will have tax implications as well as a 10% IRS penalty.
While this is a downside, 529 plans are transferable between family members, with some restrictions, as well as can be used for graduate school or secondary school.
Most states offer a 529 plan, but its important to know that you don’t have to use the 529 plan for the state you live in. However, some states do allow for tax deductions or credits for 529 contributions if you reside in that state and use its 529 plan.
While investment options within 529 plans can be limited, if you do not want to manage the investments yourself, many plans offer a target date or glide path strategy that manages the risk of the account to conincide with when the student would start college.
Contributions are flexible in amount, timing, and who can contribute.
While there are many benefits, you will want to pay attention to how the account is structured and the fees you may incur. Both of these can vary widely depending on the 529 plan.
While 529s are great for many people, it may not be your best option. It is best to do your research or work with a financial advisor or certified financial planner to determine what is in your best interest.