529 College Savings Plan

5/29/2022 3 minute read

One of the most popular ways to save for college

Signs It’s Time for a Financial Check-up
 

529 savings plans are tax-advantaged education savings accounts and are one of the most popular ways to save for college. They’re not just for college savings – they can also be used to save for K-12 tuition. 529 savings plans offer a unique combination of features:
 
  • Federal tax advantages. Contributions to a 529 account accumulate tax deferred and earnings are tax free if the money is used to pay the beneficiary’s qualified education expenses. (Any withdrawal not used for qualified education expenses is taxed at the recipient’s rate and subject to a 10% penalty.)

  • High contribution limits. Most plans have lifetime limits of $350,000 and up (limits vary by state).

  • Unlimited participation. Anyone can open a 529 savings plan account, regardless of income level.

  • Wide use of funds. Money in a 529 savings plan can be used to pay the full cost (tuition, fees, room, board, books, supplies) at any accredited college or graduate school in the United States or abroad; for certified apprenticeship programs (fees, books, supplies, equipment); for student loan repayment (there is a $10,000 lifetime limit per 529 plan beneficiary and $10,000 per each of the beneficiary’s siblings); and for K-12 tuition expenses up to $10,000 per year.

  • Professional money management. 529 savings plans are offered by states, but they are managed by designated financial companies who are responsible for managing the plan’s underlying investment portfolios.

  • Flexibility. Under federal rules, you are entitled to change the beneficiary of your account to a qualified family member at any time as well as roll over (transfer) the money in your account to a different 529 plan once per calendar year without income tax or penalty implications.

  • Accelerated gifting. 529 savings plans offer an estate planning advantage in the form of accelerated gifting. This can be a favorable way for grandparents to contribute to their grandchildren’s education while paring down their own estate, or a way for parents to contribute a large lump sum.
529 plans are governed by federal law, but their implementation is left to the states. Many states offer more than one option. Texas offers 3 tax-advantaged 529 savings plans. Each plan has its own rules and restrictions which can change at any time. So we recommend consulting with an experienced professional to select a plan that works best for you.

We’re here to help you build the financial slack you need for your child’s education. That’s why we have CUSO Financial Services, L.P. Financial Advisors here to support you on your financial journey and help you plan for the future. Make an appointment for a complimentary consultation or ask about them when you visit one of our Financial Health Centers.
 








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