my529 Account facts & myths: preparing for your child's future

Rochelle Allen, Program Coordinator, Empowering Financial Wellness 

Did you know that May 29th is National 529 Day? To celebrate, my529, Utah’s tax-advantaged college savings plan, is offering a fantastic limited-time deal: Open a new account between May 1st and May 31st, 2024, and receive up to $40 contributed to your account.

In a 2023 study on Trends in College Pricing and Student Aid by The College Board, findings revealed that recent high school graduates may encounter college debts as high as $37,000. Thus, the importance of saving for college has never been more pronounced. To better understand how a 529 account functions, let's explore it further and debunk some prevalent myths.

Have you heard the myth that a 529 account can ONLY be used for college tuition? It's a common misconception, but it's false. Money in a 529 account can also cover qualified educational expenses such as room and board, books, computers, and internet. Plus, funds can be utilized tax-free for up to $10,000 for qualified K-12 expenses, registered apprenticeships, and technical colleges.
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And what if all the funds aren’t used for educational purposes? No problem! You have more options than ever. You can now roll money into a Roth IRA under certain circumstances. Younger sibling heading to college soon? Thinking about going back to school yourself? You can transfer funds to another eligible family member, including yourself! You can even maintain the account for future generations. These are the kind of leftovers you want!

There are also fantastic tax advantages to a 529 plan. It may be eligible for state tax deductions, and earnings within the account grow tax-deferred. Withdrawals for qualified education expenses are tax-free at both federal and often state levels, boosting your savings. Additionally, there are advantages when it comes to the FAFSA. Funds held in a parent-owned 529 account are typically treated as parental assets on the FAFSA, reducing their impact on financial aid eligibility.

If you think that 529 accounts aren’t flexible, think again. Choose from a range of investment options and use funds for qualified education expenses at any eligible institution nationwide. This flexibility empowers you to tailor your strategy and cover diverse educational needs.
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By starting early and making regular contributions, you can leverage the power of compounding to build a substantial fund for educational expenses. With no income limits or age restrictions, anyone can open and contribute to a 529 account on behalf of a beneficiary. 529 accounts offer a winning combination of tax advantages, flexibility, and control to help you achieve your education savings goals. Start saving with a 529 account today to secure your child's educational future and unlock a world of opportunities.