Be prepared for anything
You're already dreaming about your baby's future, and chances are education will be part of his 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 he's 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 other purpose, you'll pay taxes on any gains, as well as a 10% early withdrawal federal tax penalty in addition to federal and, if applicable, state income tax. 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.)
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 he won’t change his 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
The 529 assets can be used to pay qualified student loans of a beneficiary or the beneficiary's sibling (up to a $10,000 lifetime maximum). Remember you can designate yourself as the beneficiary.
Pursue another path
The money in a 529 savings plan isn’t limited to four-year universities. Community colleges, seminaries, trade schools or certain apprenticeship programs … any path your child chooses that involves professional training at an accredited institution could be eligible for a 529 savings plan. You can find a full list of accredited choices on FAFSA.
And keep in mind that you can use the funds for more than just tuition and training. Related educational supplies — from textbooks to laptops — are qualified expenses, too.
Use it for primary education
Maybe a younger child can take advantage of the money you saved in your 529 savings plan. The assets in a 529 savings plan can be used for tuition at private K-12 schools (up to $10,000 a year), but note that not all states allow K-12 tuition as a 529 savings plan qualified expense for state tax purposes.
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 he or she is a member of the family of the previous beneficiary. A member of the family generally includes the beneficiary’s descendants, the beneficiary's brothers, sisters, parents, uncles, aunts, in-laws, spouses — even first cousins. And don't forget, you can be a beneficiary, too.