It’s May 29, and you know what that means… time to celebrate one of the most powerful tools out there for college savers! A 529 plan allows people to save for education with tax-deferred growth and tax-free withdrawals.
If you are interested in learning more, check out some fast facts on 529 plans below and enjoy some of our “greatest hits” from the Bodnar Financial blog:
And don’t forget! We offer 529 plan “gift certificates” for clients looking for the perfect birthday party or baby shower gift.
5 Fast Facts for 529 Plans
1) They aren’t just for college.
529 plans can be used on qualifying educational expenses at eligible vocational and trade schools. Thanks to the 2017 tax reform law, families can also use them to pay for up to $10,000 in tuition expenses at elementary and secondary public, private, or parochial schools. In 2019, the SECURE Act further expanded the scope of 529 plans to be used for apprenticeship programs and the repayment of student loan debt.
2) Anyone can open a plan and contribute.
If you have a Social Security number and a permanent address, you can open a 529 plan and name a beneficiary. There are no contribution minimums or income requirements. Once the plan is open, anybody can contribute.
3) There are contribution maximum limits.
Parents have started “crowd-sourcing” their children’s education savings by encouraging family to contribute as a birthday or holiday gift. This is great, but just make sure family members don’t accidentally overfund the account.
4) The beneficiary does not control the money.
The account owner (aka. the person who opened the account) has complete legal ownership of the money in the plan, even after the beneficiary turns 18 years of age. Anyone who has met a teenager understands why this is a good idea….
5) You can open a plan in another state.
You can use a 529 plan from any state to pay for eligible schools in any state. However, some states offer special financial aid benefits for students who have a 529 plan in the state, such as not counting the plan as an asset when determining eligibility for state grants and other state aid.