Happy 529 plan day!
What is a 529 Plan?
A 529 plan is an investment account that offers tax-free earnings growth and tax-free withdrawals when the funds are used to pay for qualified education expenses. For college, university, and other eligible post-secondary educational institutions, this includes tuition, fees, books, supplies, equipment, computers and sometimes room and board. The IRS also allows tax-free withdrawals of up to $10,000 per year, per beneficiary to pay for tuition expenses at private, public and religious K-12 schools. There are two types of 529 plans: college savings plans and prepaid tuition plans. Almost every state has at least one 529 plan. There is also a 529 plan operated by a group of private colleges and universities.
College Savings Plans work much like a Roth 401(k) or Roth IRA by investing your after-tax contributions in mutual funds or similar investments. The 529 college savings plan offers many investment options from which to choose. The 529 plan account will go up or down in value based on performance of the investment’s options.
Prepaid Tuition Plans let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Private College 529 Plan is a separate prepaid plan for private colleges, sponsored by more than 250 private colleges.
For more information on the benefits of 529 plans, please click the link below: