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Can Adults Use 529 College Savings Plans?

Sep 15, 2012

With the economy still in a rut many adult workers are having a hard time finding work. While waiting for job prospects to get better many have decided to go back to school for more education. The thinking here is why not make yourself more in demand by retraining and adding another degree to your resume. Regardless of your age, you can set up a Section 529 plan for yourself to fund educational expenses now or in the future.

You can use the 529 plan money to add new skills, degrees, and certifications. The 529 plan funds can be used for tuition, books, fees and even a computer, as long as it is used to further your studies.

Even if you decide not to use the 529 plan money on your own education you can later change the beneficiary of the plan to your child or grandchild, nothing is lost.

Many people fail to use 529 plans because they feel they are not getting any direct tax benefit on the annual income tax. But when they withdraw the funds for qualified education expenses they do not have to pay income tax on any growth the investment incurs.

It's time to start your 529 plan.

Starting a 529 plan for yourself or your child is easy to do. The first thing you do is choose which state plan you want to use.

Many states give a tax deduction for state residents contributions. It makes sense to use your states tax relief instead of choosing another states 529 plan when you can save money on your state income tax. You can open an account for as little $50 to $100.

Choosing the investment option in your plan takes a little thought. Under normal circumstances when using a 529 plan for a child you normally have a span of 18 years to save and watch your money grow. The investment options carry some risk but over time they average out and you have reasonable growth. But when it is for the use of an adult you do not want to have any risk of principle so it would be wise to little or no risk on the investment.

What if I need the money right away?

If you need the money right away for education expenses it still is a good idea to deposit funds in a 529 plan account. In some states the money only has to be in the account a minimum of 10 days before withdrawing it and it count toward your tax deduction. You need to check the details of your states tax code to see if just parking the money in the account a specific number of days will count toward a good tax deduction. An example would be Missouri which gives a tax deduction of 6 percent when investing in the states 529 plan. The money only has to stay in the account for 10 days before counting toward your tax deduction.

Before using this strategy be sure to check carefully the rules and regulations concerning the 529 plan and your states tax code. So even if your still in school and your state has these kinds of benefits it would be smart to try this plan. Even if you over fund the plan or change your mind about an eduction you can always hold on to the 529 plan and put it int he name of your children at some later date. All you have to do is change the designated beneficiary to your child when they are born.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

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