FRESNO, Calif. (KFSN) — From tuition and student fees to room and board, paying for higher education can get expensive.<\/p>\n
There are tools that can help you cover the cost without taking out a loan.<\/p>\n
“Plans are typically used for higher education,” says The Academy of Financial Education CEO, Samuel Molina. “However, they’ve expanded to be used for K-12, vocational schools or apprenticeship schools.<\/p>\n
A 529 account is a state-sponsored investment account designed to save for future education costs.<\/p>\n
“You can buy pre-qualified tuition, so you’re locking in today’s tuition rates or you’re investing into an account over the next 15-20 years, depending on when your child decides to use it for college education,” Molina said.<\/p>\n
Contributions grow tax-deferred, and withdrawals are 100% tax-free when used for qualified expenses, including college tuition, fees, books or up to $10,000 for K-12 tuition.<\/p>\n
Molina says this is an option to inflation-proof your savings for higher education.<\/p>\n
“Education might rise at a 5% rate every year, so you need to keep that money growing at a faster rate than college education or apprenticeship schooling,” he said.<\/p>\n
Anyone can open an account for a beneficiary.<\/p>\n
Should that child not spend the entirety of the account or decide they don’t want to pursue higher education down the road, you have options.<\/p>\n
“You can use it for their high school time, and you can also switch it over to a Roth account if the account has been open for 15 years,” Molina said.<\/p>\n
It can also be transferred to someone else in the family.<\/p>\n
“These maintenance fees are really low, so not only are you having a tax-exempt investment account, the maintenance fees are really low, so it allows you to grow more rapidly,” Molina said.<\/p>\n
Like other investment accounts, it’s important to keep in mind that the 529 plans are subject to market ups and downs.<\/p>\n
Your investment choices are usually limited to a set menu offered by the plan administrator.<\/p>\n
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