Reasons to Use 529 College Savings Plans

“What if they don’t go to college?” causes a lot of families to miss the bigger picture on 529 accounts. 1) Tax-free growth if used for education. And “education” includes far more than just traditional college. Funds can be used for many types of post-secondary education and vocational programs. 2) They can also be used for K-12 private school tuition, up to $20,000 per year. Check your state’s conformity to the federal rules. 3) Here in Pennsylvania, we also receive a state tax deduction for contributions. Not every state offers this benefit, but PA does. In high tax states this can be significant. 4) We started our kids’ accounts young, which means they should satisfy the 15-year rule allowing up to $35k of unused 529 funds to eventually be rolled into a Roth IRA in the child’s name, subject to annual contribution limits. 5) With three kids, chances are high at least one of ours will use the funds. And 529s allow beneficiary changes among siblings if plans shift over time. If one child ends up using more of the education funding than another, our plan is simply to equalize things later through gifts from our brokerage account. I have no idea what education will look like by the time my kids are college age, but 529 accounts are a lot more flexible then most people realize. We chose public school for kindergarten. So for now those 529 funds are still compounding.

Before my son Ace was born, I had already opened four different 529 accounts for him across four different states. I was obsessed with finding the right 529 product. My team thought I was crazy. To me, it made perfect sense. I already knew how powerful these accounts could be when opened early and used properly. But most parents I talk to still assume the same thing: A 529 is strictly for college.  It's not. Not anymore. Yes, a 529 is a tax-advantaged account designed for education. But over the years, what counts as a qualified expense has expanded well beyond college tuition. What most parents miss is how much more flexible a 529 is today. It’s no longer just a college account. It can now help cover much more of a child’s life, including:  • Up to $20,000 per year for K–12 education • Books, tutoring, test prep, and online learning materials • Registered apprenticeship programs • Up to $10,000 in student loan repayment • And if the money is not needed for education, up to $35,000 can eventually be rolled into a Roth IRA, subject to eligibility rules Every dollar invested early has the potential to grow tax-free alongside your child. And even a few years head start can make a meaningful difference. The four accounts people thought were overkill? They're already compounding for my son's future. What is the biggest question you still have about setting up your children financially? Let me know in the comments below. 👇

Executive earning $550,000: "I'm not using a 529 plan." "We'll just pay for college out of cash flow." But he didn't realize how flexible 529 plans have become. 𝗦𝘁𝗮𝘁𝗲 𝘁𝗮𝘅 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝘀: → His state offered $10,000 of state tax deductions regardless of income level → Immediate tax savings on contributions 𝗞-𝟭𝟮 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝘀𝗰𝗵𝗼𝗼𝗹: → Can now use up to $20,000 annually for private elementary/high school → Qualifying expenses have broadened → Tax-free growth for expenses he was already planning 𝗥𝗼𝘁𝗵 𝗰𝗼𝗻𝘃𝗲𝗿𝘀𝗶𝗼𝗻 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝘆: → Unused 529 funds can be rolled to Roth IRAs (up to $35,000 lifetime) → Tax-free growth even if not used for education 𝗙𝗮𝗺𝗶𝗹𝘆 𝗳𝗹𝗲𝘅𝗶𝗯𝗶𝗹𝗶𝘁𝘆: → Can transfer between children → Can be used for grandchildren Many people don't realize they've become much more flexible. But here's they key: A 529 shouldn't be your ENTIRE plan. It should be a piece of the plan.

A client recently told me they were halting all 529 plan contributions for their 10-year old daughter. Why? "If she gets a scholarship, I don't want $50,000 locked away forever where the government can trap it." Halting those contributions would cost them tens of thousands in tax-free growth over the next decade. And the irony? That $50,000 "leftover" problem is exactly what we used to jumpstart her financial future. Instead of turning off the funding faucet, we mapped out a plan for those exact funds. First, we earmarked $35,000 of the leftover balance to roll directly into a Roth IRA (over a handful of years period) after she graduates. By moving that money from a 529 to a Roth, we immediately set her up with a tax-free retirement engine before she even collects her first corporate paycheck. If there's still a balance after that, we aren't cashing it out. We’re changing the beneficiary to her future children. That remaining $15,000 will sit, compound tax-free for another 25 years, and if compounded at 8%/year, will grow to ~$102,000 25 years down the road. And if she needs a master's degree or professional credentials down the road? The 529 pays for that, too. Stop letting the fear of having "too much" college savings keep you from building your family's wealth.

With the cost of college continuing to rise, many parents are turning to 529 plans as they offer tax savings opportunities. On the federal side, not only do funds grow tax-deferred but if funds from the account are used for qualified educational expenses, all earnings will be tax-free. On the state side, most states with an income tax allow either a deduction from income or a state tax credit for 529 plan contributions and most states also allow any contributor, not just the account owner, to claim the applicable tax benefits on their tax return. However, not all states follow the federal tax treatment of K-12 tuition or student loan expenses. In most cases, taxpayers must contribute to their home state’s plan to qualify for a state income tax benefit. However, nine states offer a state income tax benefit for contributions to any 529 plan and not only in-state plans: Arizona Arkansas Kansas Maine Minnesota Missouri Montana  Ohio Pennsylvania Finally, most states have a contribution deadline of the end of the calendar year (December 31) to qualify for a 529 plan tax deduction on their tax return for that tax year. However, taxpayers in Georgia, Indiana, Iowa, Missouri, Oklahoma, South Carolina and Wisconsin have until April of the following year to make a deductible contribution. Did you know that if there are funds remaining in a 529 account after the beneficiary completes their education, you may be able to rollover up to $35,000 to their Roth IRA without incurring the 10% penalty for non-qualified withdrawals or generating any taxable income? #taxes #financialliteracy

"What if my child doesn't go to college... is a 529 plan still worth it?" This is a fair question that I receive quite often from parents with young children. In 1980, the price to attend a four-year college, full-time was $10,231 - including tuition, fees, room and board, and adjusted for inflation - according to the National Center for Education Statistics. By 2020, the total price increased to $28,775. That's a 180% increase! While there may be changes in higher education over the coming decades, I believe 529 plans can be a great vehicle for investing for your child's future. A few things to know about funding a 529 plan: 🔸 The younger your child is, the more powerful 529 plans can be. This is due to additional years of compound growth, tax-free. 🔸 Many states provide state income tax benefits for annual contributions. Some states offer benefits per beneficiary, other states base their benefit per taxpayer, so check out how your state allocates tax benefits in advance. 🔸 You can now transfer money from a 529 to a Roth IRA, if your child does not utilize the funds for his / her education, up to a maximum of $35k. 🔸 If you have multiple children, you can change the beneficiary from one child to another. Or you can even pass on a 529 plan to future generations (i.e. grandchildren). I always caution my clients to not "overfund" a 529 plan, however, these accounts do offer more flexibility than they have in the past. Maybe your child receives a scholarship or even decides not to attend university... Imagine being able to give them a head start on their retirement savings with $35k growing tax-free before their 20th birthday... that's a huge leg up! 😊

529 Plans Got Smarter One of the biggest hesitations I’ve seen with 529 plans has been the “what if.” What if your child doesn’t use all the money? What if college costs less than expected – or doesn’t happen at all? For long-term thinkers, the problem wasn’t the goal – it was the lack of flexibility. But that’s changed. The SECURE 2.0 Act of 2024 allows unused 529 funds to be rolled into a beneficiary’s Roth IRA, tax and penalty-free. The 529 must be at least 15 years old, with a $35,000 lifetime cap and annual Roth contribution limits still applying. This isn’t just a tax update, it’s a strategic shift in how families can approach education savings. Now, a college fund can double as a long-term wealth tool. Rolling $35,000 into a Roth IRA at age 23 could grow to many hundreds of thousands by retirement, assuming consistent investing and compounding. For parents, it removes the risk of overfunding. For beneficiaries, it creates an early start on retirement. It’s a powerful reminder that smart money management means staying flexible and making the most of every opportunity. Are you treating your 529 plan as part of a larger wealth strategy? #FinancialPlanning #529Plans #RothIRA #IRALOGIX