What are the Advantages of a 529 College Plan?

List: Posted: 10/25/11

The 529 College Plan is one of the most popular vehicles for saving for college. This plan gives some good tax advantages and helps families save for school. The 529 College Plan has several advantages that you should know about.


The tax advantages of the 529 College Plan are some of its biggest advantage. This type of account grows tax free. That means that you don’t have to pay taxes on the interest your 529 College Plan accrues each year. This can really help your account keep compounding, making a big difference in eventual earnings.

Also, you can withdraw from the 529 College Plan tax free as long as you’re using the funds for educational expenses. Here, educational expenses are defined pretty broadly. You can use the money for tuition and related fees, room and board, and even books. Check with your tax professional about allowable expenses before deciding where to spend the money from your 529 College Plan.


Another advantage of the 529 College Plan is that there aren’t limits to how much you can contribute each year. Over the life of the plan, you can usually contribute no more than $200,000 to $300,000. If you have lofty savings goals, though, put that much in early, and watch compound interest go to work for you.


Anyone can contribute to a 529 College Plan, and anyone can benefit from the plan. It can be used for educational expenses even for adults. If the original beneficiary doesn’t need all the money in the 529 College Plan for school, you can transfer the beneficiary to a related person without penalty. This is convenient, too, if the original beneficiary decides not to pursue a higher education.

Financial Planning & Financial Planners

    Hourly fee-only financial planning, investment advice, tax planning & prep, college financial aid advisor, 529 savings plans, retirement planning, Dean Knepper, CPA, CERTIFIED FINANCIAL PLANNER ™ practitioner, 25 years experience

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