Here are some lesser known facts about 529 plans. With recent tax law changes, this education savings account arrangement may be more desirable than we once suggested. We would only suggest using a 529 after you are fully funding you and your spouses’ own retirement plans.
- 529 plans can be used for various types of education: While commonly associated with college savings, 529 plans can also be used for trade schools, studying abroad, and even K-12 tuition or fees.
- The SECURE Act 2.0 has increased 529 plan flexibility: Starting in 2024, account owners will be allowed to roll over up to $35,000 of 529 plan assets to a Roth IRA for the beneficiary.
- Account beneficiaries can be changed: If a child decides not to pursue higher education, the funds can be redirected to another qualified family member, like a sibling or parent.
- Anyone can open a 529 plan: It’s not limited to parents; grandparents, relatives, and friends can also open a 529 plan to contribute towards a loved one’s education.
- Individuals can open a 529 plan for themselves: If someone plans to go back to school, they can open a 529 account for their own education. Additionally, up to $10,000 from a 529 plan can be used for student loan repayment.
- Multiple accounts can be opened for the same beneficiary: Both parents and grandparents can open separate 529 accounts for the same beneficiary, maximizing education savings and potentially qualifying for state tax deductions.
- Automatic contributions and gifting options are available: Once a 529 account is open, family and friends can contribute through cash, check, electronic transfer, or online platforms. This makes it easy for others to support a child’s education.
- Time is valuable in saving for education: Starting a 529 plan early provides more time for savings to grow. The article encourages readers to open an account and begin investing as soon as possible.
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