What are the benefits of a 529 plan compared to other savings options?

What are the benefits of a 529 plan compared to other savings options?

A 529 plan offers tax advantages, flexibility in use, and high contribution limits, making it a strong choice for education savings.

What other savings options should I consider?

You might consider Coverdell accounts, custodial accounts, or regular savings accounts, each with different benefits and limitations.

How do the tax benefits of a 529 plan work?

Contributions to a 529 plan grow tax-free, and withdrawals for qualified education expenses are also tax-free at the federal level.

Are there any penalties for using 529 funds for non-educational expenses?

Yes, if you withdraw funds for non-educational expenses, you'll incur income tax on the earnings and a 10% penalty.

Can I change the beneficiary of a 529 plan?

Yes, you can change the beneficiary to another eligible family member without tax penalties, which adds flexibility.