Getting Started with 529 Savings Plans
College costs have steadily risen over the last 20 years, presenting a substantial financial burden for parents and their college-bound children. According to U.S. News & World Report, the average cost to attend a private, nonprofit institution was approximately $46,600 per year for the 2023/24 academic year, up roughly 40% from 2004. Average tuition to attend a public, four-year, in-state institution increased by 56% over the same period. [1]
For parents and their college-bound children who are concerned about sticker shock, putting a funding plan in place is more important than ever. Of course, answering the question, “How does one pay for higher education?” can be complicated, and families will have many options to choose from. For example, some may elect to pay out of current cash flow, while others may choose to utilize financing (i.e., student loans) or leverage nondedicated savings sources. Currently, one of the most popular strategies is to use a tax-advantaged education savings account like a 529 Savings Plan. We examine the potential benefits—and important considerations—of this vehicle below.
What is a 529 Savings Plan?
A Qualified Tuition Plan, or Section 529 Plan, is authorized under Section 529 of the Internal Revenue Code. [2] These plans are established and run by individual states or state agencies. 529 Plans have many benefits, with the main draw being that they offer tax-free account growth and tax-free distributions toward qualified expenses. Generally, these plans have predetermined investment options, which allow the account owner to invest in a variety of asset classes depending on their risk profile and time horizon.
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Discover how to fund a 529 plan and what to do with unused funds over on Insights Lounge .
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Disclosures
This report was prepared by Westmount Partners, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission, and such registration does not imply any special skill or training.?The information contained in this report was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions, and Westmount's opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal, or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this report may be copied in any form, by any means, or redistributed, published, circulated, or commercially exploited in any manner without Westmount's prior written consent.?If you have any comments or questions about this article, please contact us at [email protected] .