529 Day is a holiday celebrated at the end of May, usually on May 29. It is a day dedicated to promoting and raising awareness for 529 college savings plans, a tax-advantaged way to save for college expenses, K-19 schooling expenses, and apprenticeship programs.
A 529 plan is a savings plan designed to help families save for future college expenses. The plan offers tax benefits to encourage and assist families in covering the cost of college, including tax-free withdrawals for qualified higher education expenses such as tuition, room and board, and textbooks.
529 Day is a time to highlight the importance of saving for college and the benefits of 529 plans. It is an opportunity for families to learn about the different types of 529 plans available and how they can help them save for their children’s education.
The holiday was first created in 2016 by the College Savings Plans Network (CSPN), a national nonprofit organization that helps families save for college. The CSPN wanted to raise awareness about 529 plans and the importance of saving for college, and 529 Day was born.
It’s important to note that some states offer special promotions and incentives to encourage families to open and contribute to a 529 plan. Some states may offer matching contributions or waive enrollment fees for new accounts. 529 Day is designed to both raise awareness and actionably support families in the college savings process.
529 Day is also a time for families to learn about the different types of 529 plans available. There are two main types of 529 plans: prepaid tuition plans and college savings plans. Prepaid tuition plans allow families to lock in today’s tuition rates for future college expenses, while college savings plans allow families to save money in a tax-advantaged account that can be used for any qualified higher education expenses.
Families can also choose between in-state and out-of-state 529 plans. In-state plans may offer additional tax benefits or incentives for residents, while out-of-state plans may offer more investment options or lower fees. Some important costs to consider, however, are that monthly contributions to 529 plans can be high, early withdrawal penalties can be costly, and that it can count against your eligibility for financial aid. Regardless, with the rising cost of college tuition, saving early and often is more important than ever, and 529 plans offer a tax-advantaged way to save for future college expenses.
A financial professional can help answer your questions about 529 plans and the college savings process. Contact us at (540) 720-5656 to get started with a financial professional today.
Sources:
- https://www.finra.org/investors/learn-to-invest/types-investments/saving-for-education/529-savings-plans
- https://www.investopedia.com/terms/1/529plan.asp
- https://www.forbes.com/sites/robertfarrington/2022/05/29/celebrate-529-day-should-you-open-a-529-savings-account/?sh=5dbb59ef3205
- https://www.bankrate.com/investing/529-plan-benefits/
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