8 Reasons to Save in a 529 Plan

As a financial advisor, I often find my clients asking me how they can best save for their children's education. A 529 plan often stands out as a highly beneficial option, and here's why: 

1. Easy & Convenient 

• Most plans can easily open an account in just 15 minutes.  By setting up automatic contributions from your bank account, making regular contributions becomes a part of your wealth management plan. 

2. Savings Grow More Due to Tax Advantages 

• Your earnings are free from federal income tax when used for qualified expenses.  In the meantime, your contributions are reinvested automatically, so your account can grow more than a taxable account over the same period. 

3. Use at Schools Anywhere 

• Plan assets can be used at any accredited university, college, or vocational school nationwide and abroad.  Any institution with a student aid program qualifies. 

4. Use for More Than Just Tuition 

• Plan assets can be used to pay for tuition, certain room and board costs, computers and related technology expenses, fees, books, supplies, and other equipment. 

5. Lower Impact on Financial Aid than Other Savings Options 

• Many parents worry that a 529 savings account can adversely affect eligibility for financial aid.  However, so long as the parent is the account owner, funds are typically treated as belonging to the parent, not the child, minimizing the impact on financial aid. 

6. Everyone Can Help 

• You don’t have to do it all on your own!  Grandparents and other family and friends can make gifts to your account for maximum growth potential. 

7. Unused Funds Can Be Used for Other Eligible Members of Your Family 

• Suppose your child or grandchild doesn’t need all the money or their education goals change.  In that case, you can designate a new beneficiary penalty-free so long as they’re an eligible family member. 

8. Estate Tax Planning Benefits 

• When you or anyone else contributes, it may qualify for an annual gift tax exclusion of $16,000 per year for single filers and $32,000 a year for couples.  In addition, many 529 Plans will allow you to give up to 5 years’ worth of gifts at one time — for a maximum of $80,000 for a single filer and $160,000 for couples. 

In my experience as a financial advisor, using a 529 plan can be a key part of a comprehensive approach to saving for educational expenses. Remember, the best strategy is one tailored to your individual circumstances and goals.

If you'd like to discuss 529 plans, contact us for more information.