Why 529 Plans Deserve Another Look

Fidelis Wealth Advisors |
Categories
education

For many, August means back-to-school basics like fresh notebooks, first-day outfits, and packed lunches… but it’s also an ideal time to talk about something equally important: saving for education. Whether you’re a parent, future parent, or someone who just wants to learn more, now’s the time to brush up on 529 plans and ways to fund future learning. 

A lot of people have avoided 529 plans in the past.

And honestly, that hesitation often made sense.

A 529 is a tax-advantaged account designed to help save for education. In the recent past, the catch was how rigid those dollars could be.

If your child didn’t go to college…

If they didn’t use all the funds…

Or if you needed the money for something else…

You could face income taxes and a 10% penalty on earnings.

That made it feel like you had to guess the future correctly or risk getting it wrong.

But recent rule changes have started to address some of those concerns.

It may be worth taking a second look.

Here’s what’s different:

They now allow you to create a back-up plan.

You can roll up to $35,000 of unused 529 funds into a Roth IRA for the beneficiary, subject to certain conditions.1,2 That means the money doesn’t have to sit unused or trigger penalties.

It’s no longer just about college.

529 funds can now be used for career training, certifications, and trade programs. So, the plan can still work even if the path looks different.3,4

You have more flexibility earlier on.

Now you can withdraw up to $20,000 per year for K–12 expenses, and it’s not limited to tuition (exclusions apply in certain states, see here).3,5

What this could mean for you:

  • You’re not locked into a single outcome
  • How you use the plan can shift without triggering tax consequences
  • Saving for education doesn’t have to feel all-or-nothing
  • And if you’re a grandparent, 529 plans can still be a tax-efficient way to support a child’s future, with options like superfunding to contribute more upfront

This doesn’t mean a 529 plan is the right fit for everyone.

But it does mean the tradeoffs look different than they used to.

If you ruled this out before, it may be worth revisiting.

If you want to talk through how these changes could apply to your situation, we are here.

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.

We are not affiliated or endorsed by any government agency.

Investment advisory services are offered through Fidelis Wealth Advisors, LLC, an SEC registered investment advisor. This content is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investing involves risk and results may vary, there is a possibility of loss, under-performance, or that past performance is not indicative of future results. Opinions expressed herein are those of the advisor and are subject to change without notice.