Wed Sep 25 2024, by Tyler Gardner

4 Reasons I'm Obsessed with the 529 College Savings Plan

Here are the four reasons that I am now officially obsessed with the 529 College Savings Plan. I'm Tyler, a former financial advisor and portfolio manager, and I create financial content for free to help you make informed decisions.

1. Better Investment Options

The investment options are way better and cheaper now. You can invest in low-cost Vanguard options in most states.

2. High Contribution Limits

You can contribute over $550,000 in some states, so you never have to worry about whether this account will achieve your goals.

3. Gift Tax Exclusion Benefits

Speaking of funding, we know there’s a $17,000 gift tax exclusion in 2024, but what you might not know is that you can elect to put five years' worth of contributions in all at once, per parent. This means you could contribute $170,000 tax-free into that account the day your child is born, giving it 18 years to grow tax-free.

4. Flexible Beneficiary Options

Also, you can now roll over up to $35,000 of unused funds to the beneficiary's Roth IRA. But guess what? There’s nothing that says I can’t change that beneficiary to myself, allowing me to avoid Roth income limits for seven years.

5. Parental Asset Advantage

Unlike the UGMA and the custodial Roth, the 529 plan is considered a parental asset. When determining financial aid contributions, colleges will usually only expect about 5.64% of a parental asset, versus 20% of a child asset.

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