1051. Are you worried about the rising cost of college? In celebration of College Savings Month, Laura compares the two main types of education accounts: 529 savings plans and 529 prepaid tuition plans. You’ll learn their key differences and how to choose the right plan.
Key Takeaways
- Both 529 savings and prepaid plans offer tax-free account growth and tax-free withdrawals when used for qualified education expenses.
- 529 savings plans invest in market portfolios (like index funds) for higher growth potential, while prepaid plans lock in current tuition rates at state universities to hedge against rising costs.
- 529 savings plans cover tuition, room, board, books, computers, trade schools, and up to $20,000 per year for K–12 tuition.
- Prepaid plans only cover tuition and mandatory fees at a preset in-state university.
- Unused funds in a 529 savings account open for at least 15 years can be rolled over tax-free into a Roth IRA for the beneficiary (up to a $35,000 lifetime cap).
- You can use both accounts to lock in prepaid tuition rates and a savings plan to cover many other qualified education expenses.
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Email: Laura@LauraDAdams.com or leave a voicemail: (302) 364-0308.
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