529

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as qualified tuition plans, are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. Savings plans grow tax-deferred and withdrawals are tax-free if they are used for qualified education expenses. Prepaid tuition plans allow the account owner to pay in advance for tuition at designated colleges and universities.

Why you should invest in a 529 college savings plan

  1. A 529 plan is a tax-advantaged savings account designed to be used for the beneficiary's education expenses

  2. Use the money in your 529 for a wide range of educational expenses including college expenses, K–12 tuition, certain apprenticeship costs, and even student loan repayments.

  3. Unlike a custodial account, with a 529 plan the account owner maintains ownership of the account until the money is withdrawn.

Tax advantages

There may be tax advantages to saving in a 529 plan. If the money stays in the account, no income taxes will be due on earnings. When you withdraw money to pay for qualified education expenses, those withdrawals may be federal income tax-free—and, in many cases, free of state tax.


Key facts of the 529

  1. There is no income cap/limit to open an account

  2. Anyone of any age can be the beneficiary of a 529 plan

  3. Anyone can contribute to your beneficiary’s 529 plan. It doesn’t have to be the owner

  4. You can invest your money in a 529 through several brokerage firms

  5. Contribute up to $75,000 ($150,000 per married couple) per beneficiary in a single year without eating into your lifetime gift-tax exclusion

  6. Withdrawals from a 529 plan account can be taken at any time, for any reason. But, if the money is not used for qualified education expenses, federal income taxes may be due on any earnings withdrawn. A 10% federal penalty tax and possibly state or local tax can also be added

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” Warren Buffet

With all investments, please perform research and choose the right investment option that’s best for your current/future needs.