529 Plans: Time to Get Educated

    Facebook Twitter LinkedIn Email

By Evan Mayhew - May 29, 2019

What’s keeping you from opening a 529 plan account to invest for education? Think there are too many restrictions and high minimum investments? Think again.

College and education decisions are hard enough without worrying about how to pay for it. Don’t let these common myths discourage you from getting started.

Myth 1: It costs a lot to open and maintain an account.

Fact: Fact: Most plans have low minimums (or even no minimum). To help families save even more, some plans offer matching grants, rewards programs or gifting services (such as Ugift®  ) that let others make gift contributions to your student’s account.

Myth 2: If your child doesn’t go to college, you lose your money.

Fact: Unlike other college savings options, the 529 plan account owner controls the account. That means you can change your beneficiary to another eligible “member of the family” (as per plan rules) with no tax penalty.1

Myth 3: You have to make a lot of investment decisions.

Fact:  Whether you prefer a one-step or do-it-yourself strategy, 529 plans generally offer several investment types that can meet your needs. The one-step strategy is an age-based option where the investment becomes more conservative as the beneficiary gets closer to college age. The do-it-yourself strategy offers a range of individual portfolios that allow you to create your own investment plan.

Myth 4: A 529 plan is only for schools in your home state.

Fact: You can use the assets at any eligible school2 around the country and abroad. That includes two- and four-year colleges, graduate schools (including law and medical), vocational/technical schools, and K-12 education.

Myth 5: You can only use 529 plans to pay for tuition.

Fact:  You can use your account assets for many higher education expenses, including tuition, fees, and certain room and board costs.

Myth 6: I make too much money for a 529 plan account.

Fact: There are no income limitations for a 529 plan.

Myth 7: It’s too late to start a 529 plan.

Fact: Actually, it’s never too late. Even if your student is in high school or you are planning to enroll in classes soon, you can still take advantage of the tax benefits of a 529 plan. In addition, the more you manage to save now, the less you will have to borrow (and pay back) later.

The availability of tax or other state benefits (such as financial aid, scholarship funds and protection from creditors) may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors. The earnings portion of nonqualified withdrawals is subject to federal and state income taxes and a 10% federal penalty.

Myth 8: A 529 plan is only for kids.

Fact: Are you considering career retraining or an advanced degree? There’s no maximum age for a 529 plan. As long as your school is eligible, you can use your 529 plan assets—even if you’re not attending full-time.

The fact is—529 plans are a great way to invest for education. Learn how the benefits of a 529 plan can help make your student’s dreams come true.

1 The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors.

2 An eligible institution is on that can participate in federal financial aid programs.

    Facebook Twitter LinkedIn Email
Evan Mayhew
Evan Mayhew

Get Educated on 529s

Find out more about how a 529 plan can help you save for the future.

Learn More
  • Related Articles
  • More From Author

4 Reasons Why RMDs Make Great 529 Contributions

Retired and want to help fund a child's education? Here's how to link two of life's most important investment goals.

College Dreaming? Send Yourself Back to School

Thinking about going back to school? It pays to investigate your college payment options and plan ahead—even if you have limited time.

Someday, "Back to School" Will Mean Off to College

Your kid is one first day of school closer to the last day of high school. Saving for college now may help offset the burden of student debt.

    4 Reasons Why RMDs Make Great 529 Contributions

    Retired and want to help fund a child's education? Here's how to link two of life's most important investment goals.

    Someday, "Back to School" Will Mean Off to College

    Your kid is one first day of school closer to the last day of high school. Saving for college now may help offset the burden of student debt.

    529 Plans: Time to Get Educated

    College decisions are hard enough. Don’t let these common 529 myths keep you from getting started.

      IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

      This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

      American Century Investments is not responsible for and does not endorse any comments, content, advertising, products, advice, opinions, recommendations or other materials on or available directly or via hyperlinks from Facebook, Twitter or any third-party website. Facebook, Twitter and LinkedIn are registered trademarks of their respective owners.