529 Savings Plan

DEFINITION of '529 Savings Plan'

A tax-advantaged method of saving for future college expenses that is authorized by Section 529 of the Internal Revenue Code. The plan allows an account holder to establish a college savings account for a beneficiary and use the money to pay for tuition, room and board, mandatory fees and required books and computers. The money contributed to the account can be invested in stock or bond mutual funds or in money market funds, and the earnings are not subject to federal tax (or state tax, in most cases) as long as the money is used only for qualified college expenses. The plans are open to both adults and children.

BREAKING DOWN '529 Savings Plan'

States have their own 529 savings plans with unique features. An individual can open a 529 plan in any state, and the plan does not have to be in the account holder's or beneficiary's state of residence.

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RELATED FAQS
  1. What are the risks involved in a banker's acceptance?

    Learn about the different kinds of college savings accounts, how they can benefit a college saver and how to open these savings ... Read Answer >>
  2. Can mutual funds have beneficiaries?

    Learn about the different types of mutual fund ownership and the various ways beneficiaries can be established. One common ... Read Answer >>
  3. What are some examples of how I could use my IRA savings for college?

    Use your traditional IRA for qualified college expenses for you or your family. The retirement funds can be used for books, ... Read Answer >>
  4. How much should we put in a 529 each year to pay for college for two kids?

    If we have two kids, three and one years old, and assume we are on track for retirement, how much should we potentially put ... Read Answer >>
  5. What options do I have to save for my child's education?

    There are numerous options available to invest savings for a child's education: State-sponsored "529" college savings plans: ... Read Answer >>
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    Free info on financial certification exams including study guides, exam questions, and much more! Read Answer >>
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