Financial Planning
5 Things to Know about 529 Plans
A 529 College Savings Plan is a popular type of state-sponsored savings plan you can open for your child to help save for their education costs. Starting to save early for your children’s college can have major benefits - and this is one of the easiest, most common ways to do it. Here are a few things to know about 529 College Savings Plans:
You don’t need much to open one! You can start with as little as $25 and there’s no monthly minimum (though it’s important to keep contributing to get the benefits).
Each state has their own 529 plans, with different benefits (like some let you deduct contributions from your state income tax), but you can put money into ANY states 529 plan, not just the place where you live.
When the funds are withdrawn for qualifying educational expenses, it won’t be taxed. These expenses aren’t just tuition — they can include things like college room/board, books, computers, meal plans, as well as student loans (to a point), and can also be put toward private secondary school tuition.
Anyone can put contribute - grandparents, aunts and uncles, friends. Contributing to a child’s 529 plan can be a great first birthday gift to give/receive if you don’t need more things :)
If your child doesn’t end up going to college or needing the full amount, the funds can be transferred to another person for education costs, so you don’t have to worry about over-contributing. And as of 2024, funds can now be moved from 529 plans to a Roth IRA — this basically means any unused college savings can go to your child’s retirement savings (without taxes or penalties) instead, so you don’t have to worry about unused funds.
