529 Plans account for more than 30% of all education savings plans and are the most popular of their kind. These plans can be used to finance higher education expenses such as tuition, fees, and room & board for post-secondary education.
Most parents and guardians tend to save more during the teenage years of the beneficiary. This is understandable as the costs of college keep increasing each year. Therefore, a 529 Plan allows parents to save for their child’s college expenses in an easy and tax-advantaged way.
What Are 529 Plans?
These plans are tax-advantaged savings accounts that enable parents or guardians to save for a college education. Each state offers at least one 529 plan and a few states offer multiple options. Contributions made to these plans are not typically subject to federal income taxes. You may be eligible for state tax deductions or credits.
Most states, such as Connecticut, Rhode Island, New York and more, have no minimum contribution requirements. Currently, 529 plans are offered by 49 states and the District of Columbia. The total assets in 529 plans have grown to $450 billion. This is a distribution of over 15 million accounts.
Why 529 Plans Are Important
The 529 plans are a great way to save for college, as they offer more flexibility and tax advantages than other savings vehicles. The money in the account can be used to pay tuition expenses at any accredited university or college in the United States. This also includes any online courses.
Additionally, if you have more than one child you can use the same 529 plan to save for each child’s college expenses. This flexibility makes these plans an attractive and smart way to save for college.
Rollover to Roth IRA
The SECURE 2.0 Act brought in a new change that allows roll over of funds from the 529 plan to a ROTH IRA. This means that individuals and families can now transfer the funds saved in their plans to the beneficiary’s ROTH IRA account. Now, if beneficiary decides not to pursue higher education, they can use the funds saved for other financial goals such as retirement.
Conclusion
The high contribution limits and tax advantages of the 529 plans make them an attractive option for parents and guardians who want to save for a college education. By taking advantage of these plans, you can ensure that your children or dependents have access to higher education without worrying about taxes or excessive fees.
Barnum Financial Group can help answer any question you may have surrounding 529 plans. 529 Day is a national reminder to shore up your college savings plans. As always, your first step is speaking with a financial advisor today.
