Question of the Week

529 plans may do all of the following except:

a) As a prepaid tuition plan, a 529 locks in a current tuition rate at a specific school
b) As a college savings plan, a 529 establishes a savings account to defray the college costs
c) All contributions are made with after tax dollars and are allowed to grow tax deferred
d) All assets withdrawn are taxed as normal income

Answer:

The correct answer is c

Most states allow the assets to be withdrawn tax-free.

Have a Financial Question?