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Section 529 plans are tax-advantaged accounts that can be used to pay educational expenses. There are two basic types of 529 plans: educational savings plans and prepaid tuition plans.
A 529 plan invests your money based on your specific goals, risk tolerance levels, and timeline. There’s much more growth potential with a 529 plan than with a traditional savings account. And let’s face it, college costs haven’t shown signs of dropping.
If you’re thinking about opening a 529 plan for a child or grandchild, it’s essential to understand 529 plan rules and how they work. This list of pros and cons of 529 plans will help you make the right choice for your child’s education savings.
Pros and Cons of 529 Plans. While there are benefits to opening a 529 plan to save for college or other education, these plans also have potential disadvantages.
529 plans are savings plans for colleges, vocational, and religious schools that also provide tax advantages. Money invested in a 529 plan grows in a tax-deferred manner. Withdrawals from 529 plans for qualified education expenses are not taxed.
It's essential to weigh the advantages and disadvantages of a 529 plan to determine if it aligns with your financial goals.
Earnings are not subject to federal income tax, which can help savers pile up cash for college. Another attractive feature is tax-free withdrawals when the proceeds go toward qualified education...