LEXINGTON, Ky. (WKYT) – Many parents and grandparents save with the goal of assisting their family down the line. College funds are a popular way to provide for your children and grandchildren, but are 529 plans the way to go? Independent financial planner Josh Smith of Strategic Wealth Designers joined us on the newscast to discuss 529 plans and potential alternatives.
“A 529 plan is a tax-advantaged savings plan to encourage saving for future costs of education,” Smith says. “They allow money to grow tax-free and can be used for kindergarten through grade 12 in addition to college tuition. If you think your child or grandchild will have tuition costs throughout their school years, this could be a good option.”
529 plans are popular for many reasons, but they might not be the right option for everyone. You may want to consider an alternative option if you want to use the funds for anything other than qualified educational expenses. Consider opening a Roth IRA or brokerage account if you will want to use the money for other purposes.
“Something to consider is that if you want to gift a car or help pay for rent, a 529 plan cannot be used,” Smith says. “A 529 is strictly for education expenses, so an alternative may be used in conjunction with a 529. For instance, if you used a Roth account to save, you can withdraw the principal prior to age 59 ½ if necessary.”
If saving for your children or grandchildren is something you want to do, consider multiple investment options before choosing what is best for your specific situation. To see additional stories surrounding business and economic news for the Lexington area, visit https://www.WKYT.com/MoneyMatters/ and if you have a question for Josh send an email to info@swdgroup.com.
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