As education costs continue to rise, families are seeking smarter, more flexible ways to prepare for the future. Fortunately, 529 plans have evolved well beyond their original purpose.
No longer just college savings tools, 529s continue to offer tax-free growth. With broader use cases, the versatile tools also extend expanded benefits — from broader qualified expenses to innovative policy updates that enhance their long-term planning value. Financial advisors have an opportunity to reshape the conversation and help clients take full advantage of these underused strategies.
Here are three timely insights to guide those discussions.
1. Beyond College
Traditionally, 529 plans have been viewed as tax-advantaged savings vehicles strictly for four-year college tuition. In reality, 529s can be used to cover most college related expenses — such as room and board, meals and supplies.
Under new rules, 529s can also cover expenses like K-12 tuition (up to $10,000 a year), registered apprenticeships and even up to $10,000 of student loan repayment for a beneficiary or their sibling.
Advisors are also increasingly using 529s as part of estate planning strategies. High-net-worth parents and grandparents can frontload contributions ($95,000 per beneficiary in 2025, using five-year gift tax averaging) to reduce taxable estates while funding education for future generations.
2. Roth IRA Conversions
A game-changing update took effect in 2024 — 529-to-Roth IRA rollovers. Under Secure 2.0 Act, unused 529 funds (up to $35,000 lifetime per beneficiary) can now be rolled into a Roth IRA, assuming the account has been open for at least 15 years and meets other criteria.
This adds a new layer of flexibility. Parents concerned about overfunding a 529 can now treat part of the balance as a future retirement asset for the child, making contributions feel less locked in.
3. Market Volatility
While market volatility often makes families feel hesitant to fund 529 plans, this is when proactive guidance matters most. Reinforce these topics with clients:
- Stay the course; don’t time the market: Encourage clients to use dollar-cost averaging, as the automatic monthly contributions can help smooth out the ups and downs. Trying to time the market often results in missed growth opportunities.
- Don’t panic sell: Remind clients that 529 plans grow tax-free. Staying invested through market cycles is more important than reacting to short-term swings. Panic selling could lock in losses and disrupt long-term education goals.
- Lean on age-based portfolios: Most 529 plans offer age-based options that adjust automatically — moving from stocks to more conservative investments as the child gets older. This built-in glide path helps manage risk without requiring clients to actively rebalance.
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