Section 529 plans are increasingly popular, thanks to legislation passed in 2001. They offer tax-free withdrawals as well as tax-free buildup, as long as the funds are used for higher education.
Even with all of those advantages, though, 529 plans may not be for everyone.
These plans work best for people with young children who probably will go to college, especially if the tax benefits will help considerably.
These plans may not work well for people with older children, in a low tax bracket. They won’t get as much out of these plans so it may not make sense to put money there and give up control.
Also, 529 plans might not be appropriate if you are concerned a child won’t go to college, if there will be a need for money for private high school, or if there are limited resources. If you are trying to accumulate an asset base, it might be too early to put money into a 529 plan.
