How To Pay for Your Kid’s Education

Without Selling Any Vital Organs

How important are education really? Well, if you don’t want your children writing sentences like that… you’ll agree, education is incredibly important. While tuition costs are rising every year, one powerful tool at your disposal is the 529 plan. With a 529, you can invest after-tax contributions, and your money will grow tax-free with compounding interest. As long as you use your 529 towards a beneficiary’s education, (see a list of approved institutions here) your money can be withdrawn tax-free, too.

You may be wondering, what happens if your child’s college tuition gets paid another way? What if your kid is a math prodigy who receives a full-ride physics scholarship? What if your son posts a viral video and becomes the next Justin Bieber? Hey, Never Say Never…

If your child skyrockets to internet stardom and decides to forego college, don’t fret. One benefit of the 529 plan is that the account holder maintains ownership of the funds. That means, you can switch the account beneficiary. Your 529 plan is flexible – it can go to other people and other purposes. Feel free to use the money toward your grandchild’s elementary school (up to $10,000 per year) or your step-son’s vocational school. Starting in 2024, you can roll up to $35,000 of your 529 into a Roth IRA. There’s even legislation in process that would allow 529 plans to cover commercial pilot courses.

It's easy to set up automatic contributions to your child’s 529 plan through a payroll deduction, but if you have questions, please feel free to reach out to us at Centrix Wealth Partners. And if you do use your 529 plan to get that pilot’s license, we also make excellent passengers!

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Centrix Wealth Partners is not a registered broker/dealer and is independent of Raymond James Financial Services.

The information contained does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Centrix Wealth Partners and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Tax implications can vary significantly from state to state. Withdrawals from 529 accounts that are not used for qualified education expenses are subject to taxes and penalties.

As a result of the SECURE ACT 2.0, unused funds in a 529 account can be rolled over to a ROTH IRA for the beneficiary. The 529 account must have been open for a minimum of 15 years and Contributions made to the 529 plan in the last five years, including the associated earnings, are ineligible for a tax-free transfer. Rollovers to a ROTH IRA are subject to the standard annual ROTH IRA contribution limits.