Investing in Their Future: What Families Should Know About 529 Plans

By John Fitzgerald

Think about a child you love, whether it’s a son or daughter, a grandchild, niece, or even a friend’s little one. Picture them growing up, full of excitement, learning, and new experiences. Saving ahead of time can help support those dreams, and a 529 plan is one tool that can make it easier.

What Is a 529 Plan?

A 529 plan is a tax-advantaged account designed to help families save for future education costs. The money in the account grows free from federal income tax, and withdrawals used for qualified education expenses are tax-free. While each state offers its own 529 plan, you don’t have to use your home state’s option. You can compare different plans and choose one that fits your needs and goals.

Benefits of a 529 Plan

529 plans stand out for their combination of tax-deferred growth, tax-free withdrawals, and flexibility. These features make them an attractive option for those planning ahead for education costs while keeping options open along the way.

• Tax Advantages

  One of the most appealing features of a 529 plan is its tax treatment. Contributions grow tax-deferred, and withdrawals used for qualified education expenses are tax-free. While contributions aren’t federally tax deductible, some states offer a tax deduction or credit on your state income taxes for contributions.

• Use Funds for More Than Just Tuition

  529 plans aren’t just for college tuition. Funds can also cover housing, textbooks, meal plans, computers, supplies, certain K–12 expenses, and even some student loan payments. However, using funds for non-qualified expenses may trigger taxes and a 10% penalty on the earnings portion.

• Flexibility to Change Beneficiaries

  If the original child doesn’t use all the 529 money, you can transfer the account to another family member without penalty. This includes siblings, cousins, and even yourself. This flexibility offers peace of mind and makes multi-generational planning easier.

• Roth IRA Rollover Option

  Recent changes allow unused 529 funds to be rolled over into a Roth IRA under certain conditions. The account must have been open for at least 15 years, and there’s a $35,000 lifetime limit per beneficiary. Annual Roth IRA contribution limits apply. Contributions made to the 529 plan within the last five years, along with their earnings, are not eligible for rollover.

• Anyone Can Contribute

  Parents, grandparents, other relatives, and friends can all open or contribute to a 529 plan. These contributions can come as birthday gifts, holiday presents, or just ongoing support from loved ones.

It’s Never Too Early to Start

Planning for education expenses doesn’t have to be complicated. By starting early and saving consistently, you can ease the burden of future costs and open doors for your loved ones. A 529 plan is just one solution to help you meet education goals. Talk to your financial advisor or reach out to our team to see how this strategy might fit into your overall financial plan.

The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

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Fitzgerald Financial Group is located at 727 East Landis Ave, Suite 1, Vineland, New Jersey 08360 and can be reached at 856-692-0022. Securities and advisory services offered through Commonwealth Financial Network®, member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance.