Americans continue to be unaware of the benefits that come with a 529 account, or just how far the feature can take their savings, finds recent research from Edward Jones.
According to a survey in conjunction with Morning Consult, half of Americans (50%) don’t know what a 529 plan is and fewer than a quarter actually use one. Of those who are saving for a child’s education, 32% are not aware of what a 529 plan is. Plus, only 25% understand the feature’s full benefits and know that it can be used to pay for more than just higher education.
Among other features, 529s can be used to pay for elementary or secondary school tuition, student loan debt, and even to help with future retirement savings. Under SECURE 2.0, investors can roll up to $35,000 of unused 529 funds into a Roth individual retirement account (IRA), under certain conditions.
“Thanks to tax law changes over the past seven years, 529 plans are more useful and applicable than ever, and can often be used tax-free and penalty-free for secondary schools, technology purchases to further education and much more,” said Andy Esser, an Edward Jones Financial Advisor in Durham, North Carolina.
According to Edward Jones, of Americans who are saving for education through a 529 plan, 77% understand that 529 plans can be used to fund more than just higher education—they just don’t know which services they can specifically pay for. Edward Jones further adds that 47% know that 529 plans can be used for vocational and trade schools, 43% understand that it can be utilized for room and board, 41% know they can use the funds to pay off student loan debt, and just 19% are aware they can rollover funds to a Roth IRA.
Utilizing a financial advisor could help investors meet their education savings targets that also tie into their own financial goals, the research notes. “It’s important for people to have a financial advisor understand what’s most important to them – whether that be education, retirement or something else – and marry those priorities with the right tax-advantaged vehicles,” added Esser. “With the recent enhancements to 529 plans, I’d encourage anyone to speak with a trusted advisor to revisit how they’re investing for their family’s future.”
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