Looking for ways to help your children achieve their educational dreams? Although higher education is priceless, it sometimes comes with a little sticker shock. One way to help prepare for that expense is through a tax-advantaged savings plan designed to pay for education – a 529 plan. Here are five benefits of a 529 plan.
1—Tax deferred growth
The 529 is a tax qualified account. As long as the funds are used for qualified education expenses (qualified expenses vary depending on the state), the growth in the account is tax exempt. This is a big advantage as all of the funds can be used towards qualified education expenses.
2—Easy money management
Most 529 plans are designed to be as easy as possible to use. This is ideal for participants that are unfamiliar with investments. 529 plans boast a wide variety of investment options, usually mutual funds. The plans often offer predetermined asset allocation funds as well as individual funds that the participants can pick, making it simple and easy.
3—No longer just for college
In the past the 529 plans were reserved for higher education funding only, but as of late most states have moved to allowing 529 plans to be used for K-12 qualified education expenses. This opens up a broader use of these accounts for many participants.
If the 529 account was opened for a particular beneficiary and those funds are no longer needed for the same beneficiary, the funds can be transferred to another. The rules will vary per state, but most states offer this added feature without penalty.
5—Tax write off
Depending on the state 529 plan, some states offer contributions to be tax deductible, and contributions into accounts are not limited to immediate family. Contributions can be made on behalf of many beneficiaries. Please consult your state 529 plan to better understand the terms and conditions of contributions.
To learn more or set up an appointment, contact a financial advisor in our Retirement and Investment Services.