Top five potential benefits of a 529 plan

Considering opening a 529 plan? Learn about the potential benefits of a 529 plan and see if it’s right for you.

Not just for college

When people think about 529 plans, they usually assume they’re used to save for college. However, 529 plans can be used for qualified education expenses starting as early as K-12.

Tax advantages and potential benefits

The most well-known benefit of 529s is that they’re tax-advantaged. This means that the earnings you make on a 529 are tax-free. Withdrawals for qualified education expenses are also tax- free,¹ and some states offer tax deductions or tax credits if you have an in-state 529 plan.

Flexible contributions and rewards

529 plans are easy to open and flexible to work with. Anyone 18 and over with a valid US mailing address and Social Security number can open an account. Not only can the account owner contribute to their 529, but family and friends can also make contributions. 

Beneficiaries can be changed easily, so that if the intended person doesn’t need the funds or decides not to go to school, the money won’t go to waste. 529 plans don’t expire either, so if funds remain, the same account can help fund the education of multiple generations of family members.

Account owner maintains control

The beneficiary has no legal claims to the money earned in the account. Funds are disbursed by the account owner to ensure that the money is being used as intended.

Minimal effect on financial aid

Enjoying the potential benefits of a 529 plan won’t hurt a student’s FAFSA (Free Application for Federal Student Aid) eligibility. The money in a 529 account is counted as an asset, not income, and only a small percentage of the earnings is used in the FAFSA calculation for student aid.