Terms

529 Account

Abbreviation
529s
529 Accounts are accounts setup for the purpose of saving for a child's education

  • Setting up a 529 account is a good way to save for a child's retirement
  • 529 account earnings are not subject to federal tax nor generally state tax when used for qualified education expenses by the designated beneficiary
    • Valid expenses typically include:  tuition, fees, books, room & board
    • Can even include primary and secondary school education
  • Contributions are not deductible at a federal level (some states may offer deductions
  • Each state controls the investment options available (often they are limited)
  • If earnings aren't used for qualified education expenses, the could be subject to tax plus a 10% penalty




529 Account Concerns

  • Some people contribute to them instead of saving for retirement. You can't use the funds for retirement, so may run out of money once retired
  • Placing money in a 401k might be a better priority - to take advantage of tax deduction & potential employer matching
  • Money in 529 account may be counted when applying for needs-based financial aid;  Money in a parent's retirement account is not considered