Last Modified on May 22, 2020

529 plans are designed to facilitate savings for higher education. However, it must be noted that these plans are designed not only for the benefit of children but for anyone who wants to undertake a qualified educational course. This implies that children are not the only ones benefiting from these plans. Parents can also utilize this investment instrument for themselves and complete a college degree. The funds from a 529 account can also be used to undertake courses for the enhancement of professional expertise. Furthermore, if an individual wants to enter a different career stream, 529 plans can be helpful by offering funds to acquire the requisite skill set to enter a new profession. 

Setting up a 529 plan

An adult can establish a 529 savings account to fund qualified education expenditure. Setting up this plan for an adult is similar to setting up an account for children. Every state offers a different set of investment policies to investors. They can select these policies based on their individual needs. Investors are also allowed to choose a policy from a different state.

Ideally, individuals should opt for a plan from the state they reside in as most state governments offer tax benefits for their residents. However, a different state’s plan can also be chosen if it provides better benefits. People should try not to opt for policies based on their age because such policies assume a maturity period of 18 years for the student to pursue higher studies. After the selection of a suitable plan, the investor should nominate themselves as both the owner and the beneficiary.    

Benefits of a 529 plan

For adults, a 529 plan can offer financial aid at various occasions. There are several circumstances due to which people have to leave their course/college in between and are not able to pursue further studies. However, if they wish to get back to a college, a 529 plan can allow them to save and complete their higher education. This account can be used to fund not only tuition fees but also the cost incurred on the purchase of books, laptops/computers, accommodation, application fees, registration fees, etc. However, all these expenses must be associated with the qualified educational course. 

The plan also allows people to cover the cost of courses that are undertaken to improve knowledge or skill sets needed at the work front. There are several courses that can give individuals an opportunity for an early promotion or a raise in remuneration. Additionally, sometimes people may get laid off from a job or hit a dead-end in their careers. In such situations, a 529 plan can be used to fund new training programs that can help people succeed in their professions. Many people also change their line of work entirely. This too can require them to attend a college or pursue a new degree in their 30s or 40s. The only purpose of a 529 plan does not have to be a child’s educational needs. It can also be used to accomplish one’s own dreams and ambitions. 

Tax advantages

The returns earned on a 529 savings account are not taxed. In addition to this, the investor will not have to pay any tax on the principal amount if the funds are withdrawn for the listed educational expenses. However, if the funds are utilized for other purposes, the owner will have to pay the necessary taxes and a 10% penalty.

No age or tenure limit

A notable trait of a 529 plan is that it does not involve an age threshold. The beneficiary can be of any age and is permitted to use the funds at time in their lives. The only condition is that the funds have to be spent on higher education courses that are qualified under this plan. There are no limitations on the tenure of the course being pursued either. The individual only has to ensure that the school or college being attended is included under the coverage of the plan. This no limitation policy of the 529 plan allows people to fulfil their requirements even at a later stage in life. This freedom from age and tenure limits gives them the flexibility of selecting the course or training that they require without considering the tenure of the course.

Modification of beneficiary

If an individual is not able to utilize the 529 plan or drops the idea of pursuing further studies, the funds will not remain dormant in the account. The owner of the account is allowed to change the beneficiary without any additional charges or penalties. However, this can only be done if the new beneficiary is a family member of the first beneficiary. The new beneficiary can be either a child, grandchild, or spouse of the original beneficiary.

To sum it up

A 529 account can, therefore, be used not only to secure the future of the children but also to fulfil the aspirations or needs of the parents. Moreover, parents can be assured that even if the funds in the account remain unused, they can still be utilized for the education of their children or the next generation. Setting up a 529 account is a life-changing decision for many investors. However, individuals need to analyze various aspects of an investment plan before they make a decision. In addition to this, one should also pay attention to the overall costs involved in pursuing a course of their choice.  

If you have any questions about the various advantages of a 529 plan and the level of investment it requires, you can reach out to experienced professional financial advisors.