Be prepared for anything
You’re already dreaming about your baby’s future, and chances are education will be part of their journey. Saving small amounts in a 529 savings plan now can make a big difference later for all kinds of learning — and will open up even more options. The flexibility of a 529 savings plan is one of its greatest benefits.
Your money, your choice
You’re willing to put money aside so that college will be within reach for your child. But what if they are on a different path and won’t need that 529 savings plan after all? Rest assured that the money you save in a 529 savings plan is always yours and always accessible.
Take the cash
Keep in mind that as long as the money in a 529 savings plan is used for a qualified expense, it’s tax-free. That’s a big perk! If you withdraw the cash for any reason other than qualified expenses, you’ll pay a 10% federal tax penalty as well as federal and, if applicable, state income tax on any gains from your account. States take different approaches to the income tax treatment of withdrawals. For example, withdrawals for K-12 expenses may not be exempt from state tax in certain states. (But note that if that dream scholarship comes through, you are allowed to withdraw the amount of that scholarship without penalty, but you will have to pay taxes on the earnings.)
A financial professional can help you craft a strategy that enables you to keep as much as possible of your hard-saved money.
Leave it alone
If your child isn’t college bound today, it doesn’t mean they won’t change their mind later. Your 529 savings plan can continue to grow tax-free for decades to come, so there’s no rush to make any changes.
Pay toward a student loan
You can use any 529 assets to pay off qualified student loans, both principal and interest, with up to a $10,000 lifetime maximum. Not only can you pay the loans for the beneficiary, but you can use the funds toward the student loans of the beneficiary’s sibling too. And remember, you can designate yourself as the beneficiary.
Pursue another path or use it for primary education
The money in a 529 savings plan isn’t limited to four-year universities. Community colleges, seminaries or trade schools or certain apprenticeship programs … any path your child chooses that involves professional training at an accredited institution could be eligible for tax-advantaged treatment in a 529 savings plan. Qualified expenses also include expenses for fees, books, supplies and equipment required for the participation of a designated beneficiary in certain apprenticeship programs.
And thanks to changes made by the One Big Beautiful Bill Act (OBBBA), 529 accounts can now be used to cover a wider array of qualified educational expenses, including certain postsecondary credentialing program expenses and expenses in connection with enrollment or attendance at an elementary or secondary public, private or religious school (kindergarten through 12th grade) beyond just tuition.
Maybe a younger child can take advantage of the money you saved in your 529 savings plan. Now, qualified K-12 expenses include (but are not limited to) tuition, curriculum materials, textbooks, instructional materials and online education materials up to a maximum of $10,000 incurred during the taxable year per beneficiary. Additionally, starting in 2026, the annual limit for K-12 expenses will increase from $10,000 to $20,000. However, note that not all states treat K-12 expense as qualified expense for state tax purposes.
Change beneficiaries
One of the best perks of a 529 savings plan is that you have the option of transferring the account to another beneficiary. The new beneficiary can use those funds for all the same educational expenses — including college room and board, tuition and books.
You can change the beneficiary at any time, as long as they are a member of the family of the previous beneficiary. A member of the family generally includes the beneficiary’s descendants, the beneficiary’s siblings, parents, uncles, aunts, in-laws, spouses — even first cousins. And don’t forget, you can be a beneficiary too.
Start retirement savings early
Unused funds held in a 529 account can be rolled over directly into a Roth IRA (individual retirement account) for the beneficiary of the 529 plan, within certain limitations. If you are concerned about overfunding their 529s, you have an option to access at least a portion of leftover assets without taxes or penalties. Limitations to this provision include the following:
- The 529 account must have been open at least 15 years.
- The amount to be rolled over must have been in the account for at least 5 years.
- The Roth account must be in the name of the 529 plan beneficiary.
- Rollovers are limited to a maximum of $35,000 per beneficiary over their lifetime.
