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A 529 plan comes in two broad varieties — a prepaid tuition plan and an education savings plan: A prepaid tuition program allows you to purchase college credits at today’s prices for future use.
Read on to explore the basics of 529 plans and how they work. In this article: What Is a 529 Plan and How Does It Work? Types of 529 Plans. 529 vs. Roth IRA. Using 529 Plans.
A 529 plan allows a participant to set up a tax-advantaged account to allow a beneficiary to use the funds for qualified education expenses. The participant deposits after-tax money into the account.
529 plans are named after section 529 of the Internal Revenue Code—26 U.S.C. § 529.While most plans allow investors from out of state, there can be significant state tax advantages and other benefits, such as matching grant and scholarship opportunities, protection from creditors and exemption from state financial aid calculations for investors who invest in 529 plans in their state of ...
A 529 plan offers several other benefits, including the ability to invest with potentially high-return assets such as stock funds, instead of being limited to low-return bank accounts.
529 plans vs. IRAs. A 529 plan is a tax-advantaged investment account that lets you save for education expenses. One giant advantage of 529 plans is that contributions grow tax-free. Once you’re ...
A 529 plan can now do much more than it could even a few years ago, thanks to various changes in laws, and the plan can now help pay down student loans. But those willing to engage in some smart ...
529 plans can be used for many college-associated expenses other than tuition.