529 savings vs. prepaid plans–benefits, rules, and strategies
· 16 min · Episode 1051
Episode 529 savings vs. prepaid plans–benefits, rules, and strategies
1051. Are you worried about the rising cost of college? In celebration of College Savings Month, Laura compares the two main types of education accounts: 529 savings plans and 529 prepaid tuition plans. You’ll learn their key differences and how to choose the right plan.
Key Takeaways
• Both 529 savings and prepaid plans offer tax-free account growth and tax-free withdrawals when used for qualified education expenses. • 529 savings plans invest in market portfolios (like index funds) for higher growth potential, while prepaid plans lock in current tuition rates at state universities to hedge against rising costs. • 529 savings plans cover tuition, room, board, books, computers, trade schools, and up to $20,000 per year for K–12 tuition. • Prepaid plans only cover tuition and mandatory fees at a preset in-state university. • Unused funds in a 529 savings account open for at least 15 years can be rolled over tax-free into a Roth IRA for the beneficiary (up to a $35,000 lifetime cap). • You can use both accounts to lock in prepaid tuition rates and a savings plan to cover many other qualified education expenses.
Discover more from Money Girl!
Newsletter
Transcripts available at QuickandDirtyTips.com.
Email: Laura@LauraDAdams.com or leave a voicemail: (302) 364-0308.
Hosted on Acast. See acast.com/privacy for more information.
Links in the notes 4
Shows are listed from Apple Podcasts' charts and directory, and Podcast Index where it is used. Every show and episode belongs to its publisher and plays from the publisher's own feed; this site hosts none of them. Explicit shows are for adult profiles only, and children’s profiles hear only children’s shows. More about this list.