The original purpose of 529 Plan accounts was to pay for college. And some people might assume that’s all they can be used for today; however, changes in the federal tax code have expanded how 529 Plan accounts can be used, exposing opportunities to use them more broadly than one might think.
Absolute Funding Limits
To take full advantage of a 529 Plan account, one might consider fully funding the account. Each state determines the lifetime contribution threshold for the 529 Plan they sponsor, but those limits are high – more than $200,000 in every state.1
Maximizing contributions to a 529 Plan account could serve several purposes. For many, the primary purpose is to ensure that the beneficiary has enough money available to cover future education expenses that come up between kindergarten and college, but a secondary purpose would be to ensure there are ample funds to use beyond college.
Read more about 529 Plan contribution limits here.
Using a 529 Plan Account Beyond College
As we’ve established, there are ways funds in a 529 Plan account can be used after the beneficiary graduates from college. Here are some scenarios you might consider when planning how much to contribute to your loved one’s 529 Education Savings Plan.
- Graduate School: 529 Funds can be used to pay the beneficiary’s tuition and qualified education expenses to attend graduate school (e.g., business school, medical school, law school).
- Vocational and Trade School: If the beneficiary decides to attend a vocational or trade school after college, a 529 Plan account could also be used. In addition to tuition, the funds may be available to cover some tools and equipment. This is also the case for apprenticeship programs registered with the federal Labor Department.
- Student Loans: The funds may be used to pay down certain student loan debts of the beneficiary or their siblings.
Importantly, these opportunities exist even if the beneficiary doesn’t use all the funds. And, because there’s no federal limit on how many times the account’s beneficiary can change, the account owner can simply name another beneficiary to the account.2
Creative Uses of a 529 Plan Account
With no federal limit on how many times a new beneficiary can be named to an account and high contribution limits, as well as the fact that 529 Plan accounts never expire,3 account owners can now explore ways to use funds creatively. Here are some ideas.
A single 529 Plan account could be used to put a loved one through college, graduate school and help pay down student loan debt. Funds can continue to be added to that same account and, along with any funds remaining, could potentially pay for another loved one’s education expenses.
The account could be used to attend cooking classes at a local community college or maybe even a study-abroad program.
There are many education savings expenses that qualify. Learn more here.
What to do Next
To see if your education savings plans are on track, use our Education Savings Calculator or call one of our live U.S.-based investment specialists.
1 Some states may impose annual contribution limits. Source: Saving for College, LLC website as of November 3, 2023.
2 Transfers to non-family members are treated as non-qualified distributions that may be subject to tax and penalties. Source: Saving for College, LLC website as of December 18, 2023.
3 Check with a plan’s sponsor to review specific rules, which may differ from state to state.
