10 Key Points About 529 Plans

May 15, 2024

10 Key Points about 529 Plans

  • Can pay for more than just tuition. Use your savings for a variety of expenses like fees, supplies, and even room and board in certain qualifying situations. Stay updated on qualifications for different expenses to make the most of your savings.
  • Have the ability to change beneficiaries. Share the educational wealth within your family. Transfer funds to siblings, grandchildren, and more, ensuring flexibility in funding for education.
  • Allow you to keep control of assets. You decide how and when to use your funds, with the added bonus of being able to change account owners if needed.
  • Have contribution flexibility. Whether it’s a little or a lot, your contributions fit your financial situation. Contribute as little as $25 or up to $235,0001 over time, making saving for education hassle-free.
  • Can be used for a wide range of schools. From local colleges to international2 ones, your savings can go far. Use them at accredited institutions, vocational schools, and even K-12 schools, giving you plenty of options for education.
  • Allow anyone to contribute to an existing plan. Regardless of who opened the account or currently controls it, anyone can make contributions towards educational savings.
  • Offer the opportunity for multiple investment options. With a range of choices, you can customize your strategy to match your preferences and risk tolerance.
  • Provide convenience. Enjoy features like automatic investment plans and portfolio re-balancing, making the process effortless as you get closer to your educational goals.
  • Benefit from Tax-free earnings. Watch your money grow without worrying about federal income tax, and when it’s time to withdraw for education, enjoy tax-free benefits. Some states allow for state income tax-deductions on contributions by residents to their own state plan (with certain limitations). 
  • Are an important tool in estate planning. Make generous contributions without the hassle of federal gift tax, allowing you to support education and wealth transfer efficiently.

1Each state has a different aggregate contribution limit for each 529 account, typically between $235,000 and $550,000. Gift Tax may be applied if you contribute more than $18,000 to a 529 account or multiple accounts with the same beneficiary in 2024. However, you can elect to spread the contribution ratably over a 5-year period, thus being able to contribute up to $90,000 in one year as long as no other gifts are made to that same beneficiary within that period.

2If the school is eligible to participate in a student aid program administered by the U.S. Department of Education.

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