A 529 Plan is a great way to save for your child or grandchild’s education. But before you open one up, there are a few things you should know about them. In this post, Michael Pellegrino outlines the pros and cons of investing in a 529 plan. So, whether you’re thinking about opening one up or not, read on to learn more!
Michael Pellegrino Lists The Pros and Cons of Investing In A 529 Plan For Your Kids or Grand Kids
If you are thinking about investing in a 529 plan, there are a few things to keep in mind. Here are the pros and cons of investing in a 529 plan:
Tax Benefits – One of the biggest advantages of investing in a 529 plan, according to Michael Pellegrino, is the tax breaks that come with it. Your contributions to the plan are made with after-tax dollars, but they grow tax-deferred and can be withdrawn tax-free as long as they are used for qualified educational expenses.
Flexibility – Another advantage of 529 plans is the flexibility they offer. With most plans, you are not limited to a specific school or type of school. The money in the account can be used at any accredited college or university in the country, as well as some foreign schools.
Control – With a 529 plan, you maintain control of the account. The beneficiary can change at any time, and if the money is not used for educational expenses, it can be withdrawn without penalty (although taxes will still apply).
Penalties – One downside of 529 plans is that there are penalties for withdrawing money for non-qualified expenses. If you do withdraw the money for non-qualified expenses, you will be subject to income taxes and a 10% penalty on the earnings.
State Restrictions – Another potential downside of 529 plans is that some states place restrictions on how the money in the account can be used. For example, some states only allow the money to be used at in-state colleges and universities.
Loss of Control – Another potential drawback of 529 plans, as per Michael Pellegrino, is that you lose control of the account once the beneficiary reaches a certain age (usually 18 or 21). At that point, the beneficiary can withdraw the money for any purpose without penalty.
The bottom line is that 529 plans offer a number of advantages, but there are also some potential disadvantages to consider before investing. If you are thinking about investing in a 529 plan, be sure to do your research and talk to a financial advisor to see if it is right for you and your family.
Michael Pellegrino’s Concluding Thoughts
529 plans offer a lot of benefits, but there are some drawbacks to consider before investing. Michael Pellegrino recommends doing your research before deciding if a 529 plan is the best option for you and your family.