As a parent, one of the greatest gifts you can give your children is the ability to pursue higher education without incurring crippling debt. Even if your child lands their dream job right out of college, starting their professional career with tens of thousands of dollars in student loans puts them at a significant disadvantage.
Luckily, you can give your kids the tools and strengths they need to succeed by saving for college early. While there are many investment vehicles you can use, one of the most popular is known as the 529 College Savings Plan.
Whether you’ve already opened a 529 College Savings Account or are about to, the following information can help you take full advantage of this plan:
1. You can invest in several savings plans
The 529 College Savings Plan is one of the most versatile options when it comes to investing in your child’s college education. However, you can complete a 529 college savings plan with other investment vehicles to diversify your portfolio. This approach can be helpful if your child decides to start their own business or explore non-traditional educational opportunities.
2. 529 funds can be used for K-12 expenses
According to the IRS, 529 college savings funds can now be used to cover expenses to attend K-12 educational institutions, such as private or religious schools. New IRS regulations for 529 college funds allow recipients to use up to $10,000 per year to cover tuition, books, fees, supplies, and other expenses.
3. Shopping is a great idea
Contrary to popular belief, you don’t have to invest in an in-state 529 college savings plan. If you prefer, you can invest in a plan that is operated by an out-of-state financial institution or another monitoring entity. While some states allow you to earn a credit on your income tax for 529 contributions, others do not. If another state’s plan offers better investment opportunities or costs less, why not take advantage of those benefits? This approach is especially beneficial if your state offers less than ideal tax breaks for investing in a 529 plan.
4. Change of beneficiary is authorized
When setting up your 529 savings plan, you will need to designate a beneficiary. However, you can always change your beneficiary in the future, if necessary. More specifically, the The IRS lets you change your beneficiary to a brother or sister, to yourself or to your child’s other parent. The new beneficiary can then use the 529 funds to cover approved education costs without incurring a tax penalty. Additionally, 529 funds can now be used to repay up to $10,000 in qualified student loans for the beneficiary and their siblings, according to the SEC.
5. 529 funds cover adjunct college expenses
Unlike some other college savings plans, 529 funds can be used to cover ancillary college expenses. Examples include books, fees, equipment, and even room and board. This flexibility is one of the main reasons why 529 college plans are one of the most popular options on the market.
529: A flexible choice
Even if you make wise choices to save for the future, you never know exactly what that future holds. A 529 plan allows you to meet whatever life throws at you, whether it’s your child’s entrepreneurial ambitions, a sibling’s college dreams, the perfect K-12 program, or many other surprises. Savings can give you peace of mind; a 529 vehicle can give you options.