529 Plan Graduate School
March 6th, 2008
Question: I am a college student. Can I open a 529 savings plan for myself?
I’m an undergrad and I plan on going onto graduate school. If I open a 529 savings plan, can I use that money for future school costs? If so, is opening a 529 savings plan better than just having a high interest savings account with my bank?
Answer: Yes you certainly can open a 529 Plan for yourself. The funds can be used for undergrad and graduate work at any qualified higher education institutions.
One of the main things to look at between a 529 and savings acct would be whether your state offers a state tax deduction for contributions you make to a 529 Plan. If this is the case it would probably be beneficial to open a 529 Plan, pick a rather conservative investment since you’ll be using the money soon, and funnel the money through the 529 acct in order to receive state tax deductions.
The other thing to look at is that any earnings you make from a 529 Plan are going to grow tax deferred and come out tax free for qualified expenses whereas your interest from a savings account would be taxed. So if you are sure that the money you’re saving will go toward college expenses that would be another benefit to consider.
If you would end up with extra money after you’re done with school it can be used for any other member in your family. However depending on who the new beneficiary is and the amount of money involved there could be gift tax issues in transferring the money…but still something to think about.
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