Why 529 Plans Are Worth It (Even If You Don't Have Kids)

A 529 is a tax-advantaged education savings account that allows money to grow tax-free and be withdrawn tax-free when used for qualified education expenses. Qualified expenses include tuition, room and board, books, required supplies, K-12 private school tuition up to a limit, apprenticeship programs, and student loan payments. Funds can also be used at many schools outside the U.S. A 529 can be opened in any state regardless of where the contributor lives or where the student will study, and some states provide contribution deductions. The account can be opened even without children by naming oneself as beneficiary, changing beneficiaries later, or rolling a portion into a Roth IRA for the child or the contributor. The flexibility of 529 plans continues to expand.

"A 529 is a tax-advantaged investment account designed for education. The structure is simple enough that I'm shocked more people don't use it. You put money in. It grows tax-free. You take it out tax-free, as long as the withdrawal is used for qualified education expenses. That covers tuition, room and board, books, laptops, required supplies, K-12 private school tuition up to a limit, apprenticeship programs, and student loan payments. You can use 529 dollars at many schools outside the US as well. The list keeps growing, which is part of the reason I'm here on my soapbox today."

"You can open a 529 in any state, regardless of where you live or where the future student plans to study. Some states give you a tax deduction for contributions, which is VERY nice, but not the main reason you should do it. The main event is decades of tax-free compounding."

"When we talk about long-term savings, I think of dollars going into buckets, with an order for filling them. I've written about this before with the Savings Order of Operations. First, pay off credit card debt, then establish the emergency fund, then invest in your 401(k) and IRA. The 529 plan is far down on the list, but if you're a fantastic saver, it's a place you should look to invest cash BEFORE going into a regular taxable b"

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