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Happy 5-29 Day!

May 27, 2020
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You’re probably asking yourself, “what in the world is 5-29 day?” While it may not be an official holiday, we would venture a suggestion that it be added to the ranks of Pi Day (March 14th or 3.14), Star Wars Day (May the 4th), and Mario Day (MAR 10). After all, college planning and 529 plans are worth celebrating!

Alright, alright, all jokes aside – let’s take a minute to stop and talk about 529 plans. A 529 plan is a tax-advantaged savings plan in the United States that is used for qualified education expenses. 529 plans make it easy to save using lump sum deposits or automated monthly savings that can be invested in a variety of ways. In addition, the funds within a 529 plan grow tax-free and distributions can be taken out tax-free if used for qualified education expenses. Your next question is probably, “what is a qualified expense?” There are many things that can be considered a qualified expense, but here is an overview:

  • Tuition and fees (for any postsecondary educational institution eligible to participate in the federal student aid program, vocational or trade schools, or up to $10,000 for private education for students K-12)
  • Computer equipment and software
  • On-campus housing and off-campus housing up to the costs of what room and board on campus would be
  • Food and meal plans
  • Books and supplies
  • Internet service

For more info about qualified expenses when it comes to 529 plans, check out or

Here are a few more questions that you may have about 529 plans:

  1. What if I set up a 529 for my child and they decide not to attend college?

There are a few things you can do in that case. First, you can change the beneficiary of the plan. Perhaps you have another child, niece or nephew, grandchild, or other family member that could utilize the funds. You could even list yourself as the beneficiary if you decided to return to additional schooling. Second, you could take the funds out of the 529. If you do not utilize the funds for qualified education expenses, there is a 10% penalty and income tax on the earnings from the plan.

  1. What if my child earns a scholarship which causes their funding needs to be lower?

Great news! You are able to take out the amount equal to their scholarship and there is no penalty. You will, however, still be subject to income tax on the earnings portion of the distribution.

  1. What are my investment options inside of a 529 plan?

Plans typically offer a variety of options but one of the most common is age-based portfolios. These age-based portfolios will change depending on the beneficiary’s age and will gradually become more conservative as they approach college age so the funds become less risky as it gets closer to when they will be needed to pay for expenses. Often you will also be given the choice to have a conservative, moderate, or aggressive track within those age-based portfolios as well depending on your attitudes regarding risk.

  1. Does my child have to go to school in the state where the 529 plan has been set up?

Not at all! 529 plans can even be used for international schools if they are eligible. If you’d like to see if your school qualifies, go to

  1. Is my income level too high to contribute to a 529 plan?

529 plans do not have any income limitations and actually receive favorable treatment on the FAFSA (Free Application for Federal Student Aid). Money saved in a 529 plan is considered a parental asset, which means student aid packages would only be reduced by up to 5.64% of the account value rather than 20% for student’s assets.

  1. Can only parents contribute to a 529 plan?

Definitely not! Anyone can set up a 529 plan for any beneficiary (including yourself!) and anyone can contribute to the plan. This is a great option for Christmas or Birthday gifts as well!

College planning can seem like an overwhelming task – especially considering the ever-increasing costs of a 4-year education – but 529 plans can be a simple first step. If large lump sums seem overwhelming, then start with a small automatic per month contribution and see if you can increase that amount over time. If paying for college is an important goal, the best thing you can do is just get started!

If you have questions about how to get started or what the future costs of education may look like, please reach out to me at to continue the conversation.


Rules and laws governing 529 plans are varied and subject to change. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 college savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. The tax implications can vary significantly from state to state. Certain changes in beneficiary may result in a taxable event. Please consult a qualified tax professional to discuss tax matters.