Now that back-to-school season is in full swing, families may feel inspired to start a 529 plan for their children.
A 529 plan is a tax-advantaged savings and investment plan designed to help pay for a child’s education. 529 plans are often utilized to help cover college tuition expenses, along with trade schools and apprenticeship programs.
These plans can offer tax-free withdrawals when utilized for qualified education expenses. Additionally, many 529 plans offer high contribution limits, giving account holders an easier means to bolster their education savings.
Due to the myriad of benefits that they offer, 529 plans continue to be a highly utilized strategy by families across the country. According to The College Investor, about 16.4 million 529 plans were open as of the end of 2023. In total, The College Investor calculates that as of the end of 2023, about $471 billion in total has been saved through 529 plans.
With the cost of higher education being as intimidating as it is, it makes sense to see why families turn to 529 plans. Per Education Data Initiative, the average cost for a student living on campus at an in-state public four-year institution sits at $108,584 over four years.
When it comes to selecting a 529 plan, families may wish to consider a portfolio that utilizes ETFs. An ETF-focused portfolio may be able to offer lower costs and higher flexibility than that of a mutual fund portfolio.