What is a 529 Account?
A 529 account (also referred to as a 529 plan) is a tax-advantaged investment account designed to encourage saving for future education expenses. There are several different investment portfolios to choose from. Traditionally used only for higher education expenses, new tax law reform has allowed residents of certain states to use the money from a 529 account for K-12 tuition expenses as well.
There are two main types of 529 plans: prepaid tuition program and savings plans. A prepaid tuition program allows for the advance payment of tuition to a specific institution which will lock in current tuition prices even if there are still many years before a student will start college. The drawback to this type of plan is the student cannot choose to attend a different college. A college savings plan allows contributions to be made on behalf a student to be used at any eligible institution. This allows for additional flexibility but doesn’t lock in current tuition prices.
What are the Benefits of a 529 Account?
529 plan offers many benefits and is a useful tool for education planning.
Flexibility
A 529 plan can be opened for the benefit of someone else – or even yourself. You can save for your own children, another family member, a friend, or for your own future educational expenses. If the beneficiary decides not to pursue college, a 529 plan can easily be transferred to a family member of the beneficiary.
Affordable
A 529 plan can be opened with a contribution as little as $25. Additionally, contributions can be made by any person up to specified annual limits, allowing other members of the family, like grandparents, to help with education costs.
Tax Advantages
A 529 plan allows you to withdraw any growth within the account tax-free as long as the money is used for qualified educational expenses. In addition, certain states allow contributions to the account to be tax deductible providing additional tax savings.
Financial Investment Team (FIT) will help you determine how much you should be saving annually and what savings options are best for you based on your individual needs. Whether a 529 plan is right for your education savings goals or you want to discuss other potential college savings options, we’re here to help!
One of the best features of a 529 plan is that they can be opened by anyone for the benefit of someone else - or even for yourself. Whether you need to save for your own children, another family member, friend or for your own future educational expenses, a 529 plan provides a great deal of flexibility. In addition, opening a 529 plan is very affordable and an account can be opened with just $25.529 accounts have become a popular way to save for future education expenses due to potential tax advantages. The team at FIT will discuss any tax advantages with you based on your specific situation.
Whether a 529 plan is right for your education expense savings goals or you want to know about other potential college saving options, the professionals at FIT will help you make an informed decision based on your individual needs.
