Benefits of 529 Plans That May Surprise You
529 plans offer a tax-advantaged way to save for education, with flexible uses that can extend beyond college. Contributions grow tax free and can be applied to qualified educational expenses, such as tuition, books, and room and board. Here are some benefits that might just change how you think about setting aside money for school.
1. 529 plans aren’t just for college. In addition to undergraduate studies, funds can be used for eligible public, private or religious elementary, secondary and postsecondary education including trade and vocational schools. Additionally, if your child doesn’t use all of the funds for their undergraduate education, you can put the remaining balance toward eligible graduate school costs and even registered apprenticeship programs that include educational expenses.
2. You are not restricted to your own state’s 529 plan. While your state’s 529 plan may offer incentives such as tax benefits to win your business, the market is competitive.
You may find that a plan provided by another state better suits your needs. Be sure to compare features like investment options, fees and performance across different plans before making a decision.
3. No age limits for beneficiaries. Unlike some other educational savings accounts, there is no age limit for when you can use the funds in a 529 plan, making it flexible for older students or even adult learners.
4. You can change the beneficiary. If your child decides not to attend college or uses less of the allotted funds than expected, you can change the beneficiary to another qualifying family member, such as a sibling, cousin or even yourself.
5. 529 funds can be used for equipment and supplies. In addition to tuition, room and board, plan funds can be used for items like computers, internet access and other necessary equipment for students attending an eligible educational institution.
6. You can use funds for student loan repayment. Under certain conditions, you can now use 529 plan funds to pay off up to $10,000 in student loans for the beneficiary or their siblings.
7. You can open a 529 plan for a friend. You don’t have to be the parent or legal guardian of the beneficiary to open and contribute to a 529 plan. You can set up a plan for a relative, friend or anyone you wish to help.
8. Funds in a 529 plan can be used for study abroad programs. If your child decides to study abroad, you can use the 529 plan funds for qualified education expenses, including tuition and required fees, for accredited, eligible programs.
9. You don’t have to use the funds immediately. There’s no deadline for using the funds, so you can leave money in the account indefinitely. This feature can be useful if your child decides to take a gap year or delay attending school.
10. 529 plans aren’t only for parents. While often used by parents, other family members such as grandparents, aunts, uncles and even friends can open and contribute to a 529 plan, making it an excellent way for loved ones to invest in a child’s future.
If you have questions about whether a 529 plan makes sense for you, or how to set one up, speak with a qualified Financial Professional who can help you.
Sources
https://www.irs.gov/newsroom/529-plans-questions-and-answers
https://www.kiplinger.com/personal-finance/careers/college/603628/529-plan-faqs
https://www.bankrate.com/loans/student-loans/529-rules-apply-to-many-foreign-schools/#should-use
https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/qualified-expenses-you-can-pay-for-with-a-529-plan
https://www.cbsnews.com/news/the-tricky-timing-of-529-savings-account-withdrawals/
https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-10