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  • Writer's pictureKevin Shuller, CFA, CFP

529s aren't just for kids

Updated: May 11, 2022

529s, like LEGO, are associated with kids, but are great for adults. Our clients find plenty of benefits in 529 plans outside of saving for their child’s education. In some ways, 529s are better than LEGO. You can’t step on a 529 in the dark and be forced to muffle your screams lest you wake up everybody in a two-block radius with your bloodcurdling scream.

529 plans will likely be part of your financial plan when saving for college. Simply put, you put money in, invest it, grow it tax-deferred until take it out, tax-free, for qualified education expenses. It’s like a Roth IRA for higher ed.

You get the biggest benefit when you invest your 529 funds for longer periods of time. Hence, they are excellent tools for college planning when you have young kids. You might also get a state tax break now if you use the 529 plan sponsored by your state. Each state has different rules, so check with your financial planner or tax professional.

These wonderful accounts have uses other than sending your kids to college. Here are a couple things clients can do for themselves with 529s:

Send yourself back to school: Are you going to get a Master's degree in a few years? Are you a lifelong learner who may want to take a class here or there? Open a 529 with yourself as the beneficiary. You won't save as much on taxes as you would saving for your newborn's eventual Cornell matriculation. The funds won't be invested as long. It's better than nothing. You may also get a nice state tax break depending on your state.

Plan waaaaay into the future: You can change the beneficiary of the 529 plan at any time. You can change it to anybody living. Are you afraid your child won't go to college in 18 years? You can change the beneficiary to you or to your grandchildren way down the line. If you are lucky enough to think about your giving legacy when you still have young kids, 529s can be an effective way to grow your legacy tax-free.

529s are an excellent arrow to have in your quiver - especially if you need an archery class to fulfill your Phys Ed requirement. Make sure you are getting the maximum benefit out of them.

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