Best Plan for College Savings: Why a 529 is the Right Choice

As a parent, you probably spend a lot of time deciding what’s best for your child — which car seat is safest; what foods are healthiest; which school has top-notch teachers; and so on. More than likely, you’ve also wondered about the best way to fund your child’s college education. It’s one of the most crucial decisions you’ll make because it could have a huge impact on their financial future (and possibly yours). Although there are numerous options when it comes to saving for education, a tax-advantaged 529 plan, such as the NC 529 Plan, is far and away the best plan for college savings.

Why do I need the NC 529 Plan?

If you have dreams of watching your child walk across a stage to collect their college diploma, you’ll want to begin saving for that dream now. Getting a college degree is expensive, and even students who are brilliant scholars or talented athletes can’t count on receiving enough in scholarship funds to cover all their education expenses. Fortunately, if you start saving when your child is young and contribute regularly to an NC 529 Account, your investment can grow into a substantial fund to cover your child’s college costs.

Even if your child is in middle or high school, it’s never too late to start saving. The more money you set aside now, the less your child will have to worry about how they’re going to pay for tuition and textbooks when they head to college.

How does the NC 529 Plan work?

An NC 529 Account is similar to a retirement savings account, but instead of saving for your retirement, you’re putting away money to be used specifically for your child’s education. You contribute after-tax dollars to the account and choose how you’d like that money to be invested. There are numerous investment options, and the money you contribute can grow tax-free. As long as you use the funds for qualified education expenses, you’ll never have to pay taxes on the earnings.

What makes the NC 529 Plan the best investment for college funds?

While it’s a good idea to examine different savings options, a CNBC article points out that “529 plans have long been considered the best way to save for a child’s college education.” Here are a few NC 529 Plan attributes that make this statement true:

1. Flexibility: The NC 529 Plan offers unparalleled flexibility because you maintain control of the funds in your account. You decide when and how to use the money for qualified educational expenses. If your child chooses not to go to college, you can designate another family member (including yourself) as the beneficiary of the account. Better still, a new regulation that took effect on January 1, 2024, allows up to $35,000 of unused funds to be rolled over into a Roth IRA for the beneficiary’s retirement fund.
2. Investment Options: The NC 529 Plan offers a wide range of investment options, allowing you to choose your investment strategy based on your child’s education timeline and your risk tolerance. You can choose from professionally assembled age-based tracks or take a more hands-on approach and select your own portfolio.
3. High Contribution Limits: 529 plans typically have much higher contribution limits than other tax-advantaged college savings options. NC 529 has one of the nation’s highest limits, allowing a maximum balance of $550,000 per beneficiary.
4. Gifting Options: NC 529 makes it especially easy for family members and friends to help you grow your child’s education savings. You simply set up a unique gifting link, and anyone you share it with can contribute directly to the NC 529 Account.
5. No Income Restrictions: Families of all income levels can take advantage of the NC 529 Plan. Some college savings options, such as the Coverdell ESA, aren’t available to families who make over a certain amount of money each year. The Coverdell also imposes an income limit on other family members (like grandparents or aunts and uncles) who might want to contribute to a Coverdell account for your child.
6. Tax Benefits: As mentioned above, earnings in your NC 529 Account grow tax-free, and you won’t have to pay any taxes on them when you withdraw funds to pay for qualified education expenses.

What are qualified education expenses?

One of the most significant benefits of a 529 plan is that it can be used to support multiple education goals. Not only is it the best plan for college savings, but you can also use those savings on other qualified education expenses. Here are some of the many ways to use your funds tax-free:

• College Expenses: NC 529 funds can be used for tuition, books, fees, room and board, a computer, internet service, study abroad programs, and more.
• Career or Technical Education: Your child doesn’t have to attend a four-year college in order to use the NC 529 Account. If they choose to pursue a degree from a career or technical school, funds will cover tuition, books, fees, etc.
• Apprenticeship Programs: As long as your child chooses a program registered with the U.S. Department of Labor or the State Apprenticeship Agency, you can use NC 529 money to pay for associated expenses.
• K-12 Tuition: You can use up to $10,000 of NC 529 funds per year/per child to pay for public or private school tuition.
• Special Needs Equipment: If your child has special needs, such as a wheelchair or other adaptive devices to attend class or turn in assignments, your NC 529 Account can help you cover the equipment cost.
• Student Loan Payments: Use NC 529 funds to pay student loans for the beneficiary or the beneficiary’s siblings — up to $10,000 per individual.
• Roth IRA: Excess 529 funds (up to $35,000) may be rolled over into a Roth IRA for the beneficiary’s retirement.

How can I get started?

Now that you know why the 529 is the best plan for college savings, it’s time to open an NC 529 Account! Enrollment is quick and easy. You’ll need your Social Security Number, the beneficiary’s information, and a minimum $25 contribution to get started. Still have questions? We have additional resources to help you find all the answers you need. Start saving today!