![]() “This is especially true if the alternative is using money that would have to be taxed, such as investments with capital gains or money in retirement accounts,” Fredrickson says. “By giving the assets a longer window of opportunity to grow, the more potential tax-free growth you may have in the plan,” says Faron Daugs, a certified financial planner in Libertyville, Ill.įor those who are on track to afford college, however, the option to use 529 savings to pay K through 12 expenses can make sense, says Tom Fredrickson, a certified financial planner in Brooklyn, N.Y. (Check your state’s rules first, because some don’t consider private-school tuition to be a qualifying expense.)īut unless you have additional savings tucked away, be cautious about using 529 money before your child reaches college. You can withdraw up to $10,000 without paying federal income taxes to cover tuition at private or religious elementary and secondary schools. Contributors can deduct 4,000 per beneficiary and 8,000 per beneficiary for joint filers. Here’s why.įor those with kids attending nonpublic elementary or secondary schools, federal tax rules allow another option for 529 money. Even a child with less than $500 in any type of college savings account before reaching college age is three times more likely to enroll in college than a child with none and four times more likely to earn a degree, according to a 2017 report by the Institute of Higher Education Policy and the Corporation for Enterprise Development.Įven if your child doesn’t take a traditional college path, saving in a 529 can be a smart move. Just having an account, even if it’s small, can be a powerful motivator to attend college and graduate. A few states-Utah, for one-have 529 plans with no minimum contribution. It’s easy to get started, even if you don’t have a lot to put away. In most states, you can open a 529 with just $25. Just one-third of families saving for college use 529 plans, the survey found. Less than half of families (48 percent) have put aside savings for college, according to a 2020 survey (PDF) by Sallie Mae, which provides student loans. of Labor or State Apprenticeship Agency K-12 tuition expenses up to 10,000 of 529 funds per year, per child Special-needs equipment Student loan payments on behalf of the 529. Still, “most families aren’t saving enough for college or saving at all,” Kantrowitz says. Trade school expenses, as long as they are on the Federal Student Aid school list Apprenticeship program expenses for programs registered with the U.S. ![]() ![]() Manage your account anywhere, anytime, from any. Assets in 529 savings plans reached $388 billion in the second quarter of 2022, up from $348 billion in second quarter of 2020, according to ISS Market Intelligence. Your savings can be used at a variety of eligible educational institutions for tuition, books, fees, and more1. The tax benefits, along with the rising cost of college, are encouraging more families to save in these accounts. More than 30 states also give you a tax deduction on your contributions. This option may be good for people who are interested in specific single funds such as equity index, money market, or social fund options.Saving in a 529 remains one of the best ways to put away money for college because you get big tax breaks on the earnings if you spend it on qualified education costs. Single-Fund: These investment options are each invested solely in either the shares of a single Underlying Fund or a Funding Agreement.Each multi-fund investment portfolio is allocated to multiple underlying funds and/or a funding agreement and has a different investment objective and investment strategy. Multi-Fund: These investment options are good for account owners who prefer to select an investment portfolio to target specific asset allocation.These options may be good for those with shorter timeframes, or those who have lower risk tolerance. Guaranteed: This investment option seeks to preserve capital and provide a stable return.This option is good for people who want a simple, all-in-one portfolio option. Age-Based: This option takes into account the beneficiary’s current age and the number of years before the beneficiary turns 18 or is expected to start college.
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