I have never shared tips on college savings on this blog because it’s not an area I have ever felt like an expert in. I was always on the hunt for tips myself and never quite felt like I had a good handle on a “plan”. My plan has been: read things online and then bother my brother (who is in finance) with a slew of texts asking questions. So when I was invited to a Momtrends event last weekend that was all about the “Craft fo College Savings” and the NY 529 plan, I knew it was something I needed to attend. At least to tell my brother I was finally driving someone new crazy with my questions!
It was a cool event: while the parents learned the “craft of savings” the kids got to create tons of crafts. We heard from people at NY 529 and Vanguard about 529 plans and had a lot of time for Q &A. I had a lot of questions about opening more than one account in a child’s name and in more than one state – which I found out we can do both of those. Instead of me giving you advice, I am going to share some of the questions and answers from the event, because I think they truly had some great answers.
529 Q & A with the Pros:
1.) What is a 529 college savings plan?
It’s a type of investment account you can use for higher-education savings. 529 plans are usually sponsored by states.
2.) What makes these savings vehicles so powerful?
Tax savings. Your earnings grow federally tax-deferred, qualified withdrawals are tax-free,* and some states (like New York) have other tax benefits as well.**
3.) Can others help contribute to the plan?
Yes! Contributions to a 529 plan make a great gift for birthdays, holidays, etc. in lieu of a traditional toy. You can invite friends and family to contribute to your account by sharing a special Ugift code on Twitter or by email. Ugift also provides printable gift coupons that you can distribute in person or by mail. You can learn more here: https://www.ugift529.com/home.html
4.) Who can open a 529 plan account?
Just about anybody can open a 529 account—parents, grandparents, other relatives, friends—as long as he or she is a U.S. citizen or a resident alien. As an account owner, you’ll pick investments, assign a beneficiary, and determine how the money is used.
5.) How can I use the money in a 529 account?
You can use it to pay for anything that’s considered a qualified higher education expense, including tuition; books; supplies; equipment; expenses for the purchase of certain computer equipment, software, and computer related services; and certain room and board fees.
6.) Can 529 accounts only be used to pay for college?
No. Your 529 account can be used to pay for qualified higher-education expenses at any eligible educational institution, including: Post secondary trade and vocational schools, 2- and 4-year colleges, and Postgraduate programs.
And a few 529 Quick Facts
- Beneficiaries can attend college in any state, not just the state sponsoring the #529 plan.
- A beneficiary can have more than one account. For example, parents can open an account for a child and grandparents can open an account for the same child.
- Advantages of a 529: tax deductions, tax-deferred growth, and tax-free withdrawals.
- 529 funds can be transferred to a close relative of the beneficiary if he or she doesn’t need the money.
Again, I am not a professional, so always ask questions before you invest.
Disclaimer: Compensation was provided by NY 529 Direct via Momtrends. The opinions expressed herein are those of the author and are not indicative of the opinions of NY 529 Direct or Momtrends.