529 Plans: A Simple Way to Save for Education in 2025

Planning for education expenses can feel overwhelming, especially with the rising cost of tuition. Thankfully, 529 plans offer a powerful, tax-advantaged way to save for your child or grandchild’s future—without compromising your other financial priorities. Here’s a closer look at how these plans work, the benefits they offer, and why they might be a smart addition to your financial plan in 2025.

What Is a 529 Plan?

A 529 plan is a state-sponsored savings plan designed to help families save for education-related expenses. It’s named after Section 529 of the Internal Revenue Code, which created this tax-advantaged savings vehicle. Over the years, these plans have dramatically evolved to offer more flexibility than ever, making them suitable for a wide range of education costs, from K-12 tuition to college and beyond.

The Benefits of a 529 Plan

There are several key reasons why a 529 plan is worth considering:

Tax-Free Growth: Earnings in a 529 plan grow federal tax-free and are not taxed when withdrawn for qualified education expenses, like tuition, books, and housing. This can mean significant savings over time.

Flexibility for Education: Once limited to college expenses, 529 plans can now cover up to $10,000 per year in K-12 tuition, certain apprenticeship programs, and even student loan repayments.

Estate Planning Advantages: Contributions to a 529 plan count as completed gifts, meaning they help reduce your taxable estate. You can contribute up to $19,000 annually ($38,000 for couples) per beneficiary in 2025, or take advantage of a five-year lump-sum gift of up to $95,000 ($190,000 for couples).

Control Over Funds: Unlike custodial accounts, the account holder retains full control of the funds, even after the beneficiary reaches adulthood. This means you decide how and when the money is used. If one child does not utilize all the funds, then it can be transitioned to another individual.

Enhanced Flexibility with SECURE 2.0: The SECURE 2.0 Act introduced a game-changing provision: starting in 2024, unused 529 funds can be rolled into a Roth IRA for the same beneficiary (up to $35,000 over their lifetime). This makes a 529 plan an even more attractive savings vehicle, offering a way to transfer wealth while providing tax-free growth for retirement.

How to Get Started

Contributing to a 529 plan is straightforward. Here’s what the typical process looks like:

1. Choose the Right Plan: While you can invest in any state’s 529 plan, selecting your home state’s plan can potentially provide additional tax benefits.

2. Open an Account: Setting up a 529 account is simple and can be done online or with our assistance. You’ll designate a beneficiary—typically a child or grandchild.

3. Automate Contributions: Consistency is key when it comes to savings. Setting up automatic contributions makes it easy to stay on track, even if you’re managing a variable income.

4. Monitor Progress: Life evolves, and so should your financial strategy. Periodically review your plan and adjust as needed.

Virginia Residents: A Special Advantage

If you’re based in Virginia, the state’s 529 plan—Virginia529—offers additional benefits:

• State Income Tax Deduction: Virginia taxpayers can deduct up to $4,000 per account annually from their state individual income taxes, with no limit for individuals aged 70 or older.
• High Contribution Limits: Virginia529 allows contributions up to $550,000 per beneficiary, giving families the flexibility to plan for significant education expenses.
• Nationally Recognized: Virginia529 consistently ranks among the top plans in the country for its low fees and strong investment options.

Planning Ahead: A Holistic Approach to Financial Goals

As financial planners specializing in the needs of realtors and self-employed professionals, we understand the complexities of managing variable income while working toward long-term goals. Education planning is just one piece of the larger financial puzzle, and tools like 529 plans can play a vital role in balancing immediate needs with future aspirations.

By integrating 529 plans and other tax-advantaged accounts into a broader strategy, you can create a resilient plan that adapts to life’s changes. Thoughtful planning ensures your financial goals—whether saving for education, managing retirement, or building long-term wealth—remain aligned and achievable without sacrificing other priorities.