529 Plans
Here are the most important things to know about 529 plans
Tax advantages:
529 plans offer tax-free growth and tax-free withdrawals when used for qualified education expenses. Many states also provide tax deductions or credits for contributions.
Flexibility in usage:
While originally designed for college expenses, 529 plans can now be used for K-12 tuition, apprenticeship programs, student loan repayments, and even Roth IRA contributions (with certain limitations.)
Wide range of qualified expenses:
Funds can be used for tuition, fees, books, supplies, computers, room and board, and more at eligible educational institutions.
Anyone can open an account:
There are no income restrictions, and anyone (not just parents) can open and contribute to a 529 plan for any beneficiary.
High contribution limits:
529 plans typically have very high contribution limits, often exceeding $300,000 per beneficiary.
Investment options:
Most 529 plans offer a variety of investment options, including age-based portfolios that automatically adjust as the beneficiary gets closer to college age.
Minimal impact on financial aid:
529 plans owned by parents have a relatively small impact on financial aid eligibility compared to other savings methods.
Flexibility in changing beneficiaries:
Account owners can transfer funds between 529 accounts with different beneficiaries, usually within the same family.
State-specific benefits:
While you can invest in any state's 529 plan, your home state may offer additional tax benefits or incentives.
Potential drawbacks:
Funds must be used for qualified expenses to avoid taxes and penalties, and investment options may be limited compared to other types of accounts.
Understanding these key aspects of 529 plans can help you make informed decisions about saving for education expenses and maximizing the benefits of these tax-advantaged accounts.
We have experts here to help select and manage a 529 plan that’s best for your family
Maybe this seems like a lot of information or maybe you’re already well versed in investing, either way, Gateway is here to help you navigate your current financial circumstances and be a guide towards your future goals. We’re only a phone call, an appointment, or email away for a free, no-obligation discussion about what makes sense for your financial situation.