529 Plans

It seems like just yesterday your son or daughter took their first step or lost their first tooth. And, if you’re like me, you blink and he’s nine years old—and while now he’s playing legos and being a super hero, in only nine short years he will be graduating high school and heading off to college. While it seems a long way off—I know the last nine years flew by. I can only imagine how quickly the next nine will fly by, too. If I want to be ready when he is, I need to start thinking about saving for college.

The projected cost of tuition could be as high as $70,000 annually by 20301 which means the earlier you start saving and considering your investment options, the more money you may potentially have to help your son or daughter fund a college education.

There are many potential options like a Coverdell Education Savings Account, IRAs, UTMA/UGMA, or 529 Plans to choose from. Of of the most flexible investing options is a 529 Plan.

What is a 529 Plan?

Created in 1986 by Congress and named after section 529 of the Internal Revenue Service, a 529 Plan is a plan offered by an education institution or state making it easier to save for a child’s post-secondary education, offering tax advantages and flexibility.

What are the benefits of 529 Plans?

  • Tax deferred growth on your earnings
  • Federal tax-free withdrawals for qualified expenses
  • Flexible investment options
  • No restrictions on source of contributions - anyone can contribute (even Grandma!)
  • No income restrictions
  • As account owner, you retain control of your assets
  • Flexibility to transfer beneficiaries (you can even transfer the funds to another child)
  • No routine maintenance is required

What are my options?

You have two options to choose from:

  • Your state-sponsored 529 plan. This plan serves those who are looking to start a 529 with minimal fees and no financial advisor assistance. Some states may offer tax deductions for using the state plan and working through the state’s administrator. For more information on Minnesota’s state-sponsored plan, visit www.mnsaves.org
  • A financial advisor. These plan options afford you the opportunity to work with an advisor, who will help you monitor and maintain your 529 plan to ensure your plan continues to meet your investing goals.

What if my child doesn’t go to college?

One of the benefits of 529 plans is the ability to transfer beneficiaries. For example, you may decide to start a 529 plan for your eldest child and find out he or she decides not to go to school. You can transfer the beneficiary designation to your next child, or even your future grandchild.

Plus, you can use the funds for graduate school as well and other school-related expenses like room and board, fees, books, and other required supplies.

How do I get started?

Sit down with an financial advisor to determine your educational goals, your level of risk tolerance, and your overall investment options.


1 This figure was estimated using the College Cost Calculator available online at https://bigfuture.collegeboard.org/pay-for-college/college-costs/college-costs-calculator#. Using the following figures: the average cost of 4-year public out-of-state college, 5% college cost inflation rate, four years of attendance,1% plan to save, and 15 years until college.