Welcome to Extreme Investor Network, where we provide valuable insights and expert advice on personal finance to help you achieve your financial goals. Today, we’re discussing the benefits of 529 college savings plans and why they are a smart choice for families looking to save for higher education.
As the costs of college education continue to rise, it’s more important than ever for families to have a solid savings strategy in place. That’s where 529 college savings plans come in. These plans offer a range of benefits, including tax deductions or credits for contributions, the ability to roll over unused funds into a Roth IRA, higher maximum contribution limits, and even a new “grandparent loophole” that can help maximize savings.
One of the key advantages of 529 plans is the tax benefits they offer. In many states, contributors can receive a tax deduction or credit for their contributions, and earnings grow on a tax-advantaged basis. Plus, withdrawals are tax-free if the funds are used for qualified education expenses. Some states even offer additional benefits, such as scholarships or matching grants, to residents who invest in their home state’s plan.
In 2024, there have been significant changes to 529 plans that make them even more attractive. Families can now roll over unused funds into a Roth IRA without incurring income taxes or penalties, as long as the plan has been open for at least 15 years. This new flexibility allows families to use the funds for a wider range of expenses, including student loan payments and apprenticeship programs.
Another benefit of 529 plans is the higher maximum contribution limits. In 2024, parents can gift up to $18,000 per child, or $36,000 if married and filing jointly, without those contributions counting toward their lifetime gift tax exemption. High-net-worth families may also consider “superfunding” 529 accounts, which allows frontloading five years’ worth of tax-free gifts into a plan.
Additionally, the recent changes to the Free Application for Federal Student Aid (FAFSA) have created a new “grandparent loophole” that allows grandparents to fund a grandchild’s college savings without impacting their financial aid eligibility. This change has made 529 plans even more attractive for families looking to save for higher education.
At Extreme Investor Network, we believe that 529 college savings plans are a valuable tool for families looking to save for educational expenses. With their tax benefits, flexibility, and higher contribution limits, these plans can help you achieve your savings goals and secure a brighter future for your loved ones. Subscribe to our newsletter for more tips and insights on personal finance.