Pros and Cons of 529 Accounts for College.

A beginner’s guide to the popular account for saving for college

When saving for college, it’s often parents who need to educate themselves about the financial options they have in front of them. As with any major expense, understanding the impact your decisions will have on your future is the first step of the process.

One popular college-saving vehicle parents can evaluate is the decades-old “529” savings account. These accounts offer tax advantages but can also have limited utility since the purpose is so specific.

These are some of the pros and cons of 529s:

The Pros:

The Drawbacks:

Your Resources

Depending on your personal situation, some advantages could work against you and some of the disadvantages could work in your favor. For example, if you don’t have a direct relative to whom you can transfer the account, you’d need to get creative about spending down the money in that account if there is any left over.

As with any major decision, you need to consider the future to determine how your actions now could affect your financial reality. If you are unclear, a financial professional can help you sort through the nuances. But there are resources available to you before you seek out professional advice.

The SEC has a 529 account guide for investors as they weigh their options. It dives deeper into the specifics around the tax code. Using the information here in conjunction with the government’s guide can be a good way to begin evaluating your options.

Additionally, Chana Schoenberger writes a regular column about saving for college and recently answered the top six questions she has received about the often-confusing plans. She has answered several years of questions that range from common to unique, which may prove helpful to your decision.

However you approach the decision, it’s important to consider all the information in front of you. There may be further considerations beyond the pros and cons listed that apply to your particular situation.

But as tuition prices continue to rise, your savings options now could affect your child’s college choice in the future. Being financially smart can mean that your money isn’t the one making the final decision for them.

The Wall Street Journal

By Kevin McAllister

March 24, 2019 2:00 p.m. ET



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