5 Benefits of Creating a 529 Account :: WRAL.com
This article was written for our sponsor, NC 529.
A college education allows for higher salaries and better benefits, but it takes money to make money — and college and business programs can be expensive, especially without any financial aid.
The NC 529 plan is a tax-efficient way to save and invest for education. It allows individuals to make regular contributions to the account to prepare for future expenses. From ease of opening to convenient contributions, here are some of the benefits of opening an NC 529 account.
Easy to open
Opening an NC 529 account is probably easier than you think, according to Takeila Hall, an NC 529 regional representative with 23 years of experience working with the College Foundation of North Carolina.
“You can open an account for anyone — even yourself — and start saving for education,” Hall said. “You can register online, as easy as 1-2-3.”
The minimum initial contribution for the account is just $25.
Help is available throughout the process, Hall said. “We have a new virtual assistant and a dedicated call center that can answer questions. Answers to frequently asked questions can also be found on the website.
Another great support resource is the NC 529 webinars. Potential attendees and current account holders can get all their questions answered and learn all the ways to use 529 funds. Anyone can browse the event calendar on the website to register and learn more on upcoming webinars.
“One of our most popular webinars is about how to use the money you’ve saved,” Hall said.
Not just for kids
While parents are often anxious to save for their children’s future college expenses, many adults themselves are returning to school for a variety of reasons, especially as COVID has spurred more career changes. It is now much easier to obtain additional training thanks to the ubiquity of distance learning programs that allow students to study and participate in classes from home.
However, according to a survey by the Education Advisory Council, while 60% of adults without a university degree say they have considered going back to school, around 70% say they feel they cannot afford it.
Adults wishing to return to college can use the funds in Account 529 to save for their education, dedicating a portion of their earnings specifically to saving for their own education. This can make the financial aspect of learning a less daunting obstacle.
Simple contributions
Participants can save in the way that suits them best. They can make regular or occasional contributions. Currently, the maximum amount that can be contributed to a 529 account is $540,000 per beneficiary. The maximum amount of projected expenses is based on four years of undergraduate study and three years of graduate or professional study.
While it’s a good idea for a parent to make regular, automatic contributions to a child’s 529 early on, parents can ask for help to increase the balance.
“You don’t have to do it alone,” Hall said. “Family or friends can show their support. If family members do not know what to get them for their birthday or Christmas, they can give them an education as a gift. We have gift forms on our website, so they send money directly to their account.
Winnings can be withdrawn tax-free
When you spend funds from your 529 account on a qualifying expense, the earnings are tax exempt. According to Hall, eligible education expenses include K-12 tuition, tuition, room and board, books, a school computer, special needs equipment, reimbursements student loans, approved apprenticeship programs and trade schools, and more.
“Some people may not know whether an educational expense will be considered qualified or not, but we can help you,” Hall said.
If an unqualified withdrawal is necessary, the participant must pay federal and state taxes on the earnings portion of the withdrawal plus a 10% penalty. Knowing that this penalty exists can help motivate participants to stick with their savings plan.
Funds can be transferred
If a student does not need the full amount saved in their 529 account, there are several ways to use the money. A smart option is to transfer the money to an account for a younger sibling or someone related to the original beneficiary. This allows other people to benefit from the money saved while preventing a penalty from being imposed on unqualified withdrawals.
“Ideally, the child starts using this money at 18, but what if the student gets a scholarship and they don’t need to use all the money in their account? Hall said. “They could save it to their account and use it in the second or third year. Maybe they didn’t need it for their associate degree, but they could use it for a bachelor’s degree, or maybe for graduate school.
This article was written for our sponsor, NC 529.
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