529 plan: Q&As

College in most parts of the world is becoming a challenge. Being a finance professional, I am often asked this question as to how to support child education in college. My article mainly focuses on undergraduate or bachelor’s education in the United States. As the saying goes, the sooner one starts saving, the better it is for the future. While there are several channels for getting aid or university scholarships, my article focuses on the savings in the popular 529 plan. The article is timely as beginning in 2024, rules are suggested for the unused part of the 529 plan. I also highlight conversion to the Roth IRA, which is the cause of confusion as it is a rule that started only recently. In this article, the beneficiary is the child or the individual’s children; typically, the individuals are the parents contributing to the 529 plan.

So, what are the typical Q&As related to the 529 plan? Please read on.

• What is a 529 plan?

A 529 tax-advantaged savings plan is designed to help families save for future education expenses. For most parents saving for the tuition of their beneficiaries (children or grandchildren in most cases), college 529 provides a tax-deferred way of investing in the equity markets.

• What expenses can a 529 plan cover?

The 529 can cover the beneficiary’s qualified higher education expenses, including tuition, fees, room and board, books, and supplies. There is a limit that can be used for K-12 tuition also.

• How does a 529 plan work?