- Many plan sponsors allow entry into their 529 programs at any time. Some programs restrict entry to certain periods during the year. These periods may be months or weeks long. Some states do allow a tax deduction for contributions, and this may be subject to a deadline for inclusion in the tax year. Your state tax office can provide this information.
- There are two types of 529 plans: college savings plans, which are more general, and prepaid tuition plans, which are a purchase of credits toward tuition at specific universities. Prepaid tuition plans often require that the beneficiary be a specific age or younger -- typically 15 years old -- to open the account. This allows for long-term growth of account investments.
- Some prepaid tuition plans also require that an account be open for a minimum number of years before the beneficiary takes withdrawals. This also allows for account growth and maturity and is typically three to five years. As with all savings plans, the earlier you contribute, the longer your investments have to grow and earn income.
- Unneeded 529 savings may be rolled into an account for another beneficiary at any time. The new beneficiary must be a family member. As with IRAs, complete the rollover within 60 days to avoid a deemed distribution and the associated tax and penalties.
- Account investment options may be changed at any time, but are restricted to two full-account changes per year. You may change the investment option for any individual contribution as you deposit it.
previous post