May 8, 2017

National 529 College Savings Day is 5/29: 12 Overlooked Benefits of 529 Plans Beyond the Tax Incentive

Featured Steven D. Brett, Managing Director, Partner at Marcum Wealth LLC

National 529 College Savings Day is 5/29: 12 Overlooked Benefits of 529 Plans Beyond the Tax Incentive

New York City, NY – National 529 College Savings Day is May 29 (5/29). While most people understand the built-in tax appeal of 529 plans, which grow tax-deferred like 401(k)s, 529s provide many additional benefits that college savers may not be aware of. Here are 12 other things to know about tax-advantaged 529 college savings plans that many people overlook, from Marcum Financial Services:

  1. Pay for More than Just Tuition – 529 plans are very flexible and can be used for undergraduate or graduate school, technical or trade schools, even cooking schools or golf schools, to cover qualified expenses such room and board, books, fees or essential items such as computers.
  2. Ability to Change Beneficiaries – 529 account owners have the flexibility to change their beneficiaries to other family members at their own discretion and without limitation.
  3. Maintain Control of Assets – Account owners maintain control of the assets at all times and direct how and when the assets are to be used. This distinguishes 529 plans from Uniform Gifts to Minors (UTMA) accounts.
  4. Choose Any State’s 529 Plan – Every state sponsors a 529 program. You are not restricted to using your home state’s plan, which enables you to shop for the plan that you feel has the best fee structures or fund options.  However, consider that you may be eligible for a state tax deduction if you choose the plan offered by your state of residency. 
  5. If Your Student Gets a Full Ride, You Can Have the Money Back – Ordinarily, if funds are withdrawn from your plan for costs other than education, you will be subject to a penalty and taxes on the earnings.  However, if the beneficiary receives a scholarship, that amount can be withdrawn without penalty.
  6. Wide Range of Schools – Accredited schools include any postsecondary college, university or vocational institution that is eligible to participate in student aid programs administered by the U.S. Department of Education. This includes approximately 10,400 schools in the U.S. and many outside the U.S.
  7. No Income Restrictions – Anyone can open a plan.  There are no income restrictions as there are with other types of accounts and funding choices for college savings.
  8. Multiple Investment Options – Most 529 plans offer a wide variety of investment options, including mutual funds and pre-arranged fund of fund portfolios that allow the owner to invest the assets in a portfolio that best fits their specific need.
  9. Earnings Grow Tax Free – If the funds are withdrawn for qualified education expenses, the principal and earnings can be withdrawn free from any obligation to pay federal income taxes.  Certain states also provide the same benefit on the state level.
  10. Estate Planning – Five years’ worth of gifting – up to $70,000 for an individual or $140,000 per couple – can be front-loaded and gifted to a beneficiary tax-free, provided there is no other gift given in the same time frame. 
  11. You Can Have More than One Account – You can open multiple accounts in multiple states and are not required to consolidate them or combine them.
  12. A 529 Can Last for Generations – There is no expiration date on 529 accounts or a requirement that it needs to be spent by a particular time.  So if there are extra assets in an account, it can be passed to other beneficiaries or generations.  In essence, the account can become a multi-generational family trust.

“As the cost of higher education continues to skyrocket, 529 plans remain one of the best options available to parents and grandparents for college savings. Because of this, companies are now starting to offer group 529 plans as part of their employee benefit programs. It fits within the push towards financial health and well-being,” said Steven D. Brett, President of Marcum Financial Services. “Many people don’t realize how much flexibility a 529 plan gives them or the advantages it offers beyond the tax-deferred growth of the investments. National 529 Day on May 29 is a great time to review and update your current college savings plan, or to start one if you don’t have one already in place.”

Marcum Financial Services is the financial planning, benefits consulting and wealth advisory affiliate of Marcum LLP, a top national accounting and advisory services firm. For more information, visit

About Marcum Financial Services
Marcum Financial Services LLC is an independent investment, wealth management and corporate benefits advisory firm providing professional advice, sound risk management, quality products and customized service. Securities are offered exclusively through Raymond James Financial Services, Inc., member FINRA/SIPC. Marcum Financial Services is a member of the Marcum Group of companies.

About Marcum LLP
Marcum LLP is a top-ranked national accounting and advisory firm dedicated to helping entrepreneurial, middle-market companies and high net worth individuals achieve their goals. Marcum’s industry-focused practices offer deep insight and specialized services to privately held and publicly registered companies, and nonprofit and social sector organizations. The Firm also provides a full complement of technology, wealth management, and executive search and staffing services. Headquartered in New York City, Marcum has offices in major business markets across the U.S. and select international locations. #AskMarcum.