GREENSBORO, N.C. — For many folks, paying for college is expensive. Tuition, housing, and books can add up to a pretty hefty bill. This College Savings Month, financial experts are encouraging families to consider opening a 529 Education Savings account.
Martha Kortiak Mert is the Chief Operating Officer at Saving for College. She said a 529 plan is an investment account specifically designed for people who are saving for education.
“There are federal tax benefits that are unique for this type of plan,” Kortiak Mert said. “The money that you put into or contribute to a 529 plan is post-tax. You don't get a break on contributions that you're making to a 529 plan on your federal income taxes, but when you go to withdraw the money, those withdrawals are tax-free. As long as that money is spent on qualified education expenses. "
Kortiak Mert says the plan can be used for a variety of expenses, like tuition, room and board, books, supplies, and equipment. Anything that's required by a college for attendance. This includes trade schools, certified apprenticeship programs, and online courses.
“A lot of people are worried about what if I have leftover money in my 529 plan,” Kortiak Mert said. “As of this year, you can transfer tax and penalty-free up to $35,000 that is left over in a 529 plan to the beneficiaries' Roth IRA. There are certain limitations to be aware of, but that’s a great benefit, a great way to kick start some retirement savings for your child if you are in the enviable position of having money left over in your 529 plan."
Keep in mind, that every state offers its own 529 plan. You also don't have to send your child to college in the state where your 529 plan is. To qualify, a student must be enrolled at least half-time at an eligible institution. Lastly, Kortiak Mert said it's best to start saving early when your child is young.