Perhaps you already know the basics of a 529 Savings Plan – it’s a tax-advantaged investment account that helps you pay for college. But there are a lot of misconceptions out there too, so we wanted to highlight a few of the great features of a 529.
Did you know about these 7 unexpected benefits?
- 529s work for all ages, from newborns to high school students. In fact, since there are no age limits, even adults can use a 529 to fund higher education later in life.
- 529s can pay for out-of-state colleges too – even overseas. You can use 529 funds at any institution that is eligible for federal financial aid, so tell your child to dream big!
- 529s minimize impact to financial aid. Student assets (e.g., savings, UGMA/UTMA) typically increase expected family contribution (EFC) by 20% of assets, but a 529 is a parental asset and therefore assessed at only 5.64% or less.
- 529s pay for much more than tuition. Other qualified expenses include fees, room and board, textbooks, supplies, computers, and related equipment.
- 529s are more flexible than you think. You can also repurpose the funds for your child’s graduate school or change the beneficiary, without paying any penalties or taxes on earnings. You can also now use 529s for K-12 schooling and apprenticeship programs.
- Many 529s have no (or low) minimums, which makes it easy for you to start and easy for family and friends to gift. With CollegeBacker you can even earn cashback rewards for online shopping with your favorite brands.
- You can get your child involved. With a 529, you can teach your child about saving and expose your child to concepts like tax-advantaged accounts, active vs. passive investing, and even asset allocation.
Still have questions about saving with a 529 Savings Plan? Send us an email us at [email protected].