No matter your child’s age, it’s never too early to start saving for their education. Time flies, and their college years will be here before you know it. So start planning today.

529 plans are a popular choice for education savings due to their tax benefits and flexibility. However, there are several lesser-known features that can further enhance your savings strategy. Here are five features of 529 plans you might not know:

1. You Can Choose Most State’s 529 Plan
You aren’t restricted to the 529 plan offered by your home state. There are numerous plans available nationwide, each with different contribution limits, fees, and tax benefits. Compare these factors to find the plan that best suits your needs.

2. Beneficiary Changes and Fund Transfers Are Simple
529 plans offer flexibility when it comes to beneficiaries. You can change the beneficiary to another family member without incurring taxes or penalties. This is useful if one child decides not to attend college, allowing you to use the funds for another child’s education. Additionally, you can roll over funds from one 529 plan to another beneficiary’s 529 plan once every 12 months without penalties.

3. Broad Range of Qualified Education Expenses
529 plan funds can be used for more than just tuition. Qualified expenses include room and board, textbooks, computers, and even internet access required for schooling. This ensures that more of your education costs can be covered using the tax-advantaged savings in your 529 plan.

4. Minimal Impact on Financial Aid
Many parents worry about how a 529 plan will affect their child’s financial aid eligibility. While 529 plans are considered parental assets and do impact financial aid calculations, the effect is relatively minor. Typically, only up to 5.64% of the value of a 529 plan is counted towards the expected family contribution (EFC) on the FAFSA. This is much lower than the assessment rate for student-owned assets, which can be as high as 20%.

5. Flexibility with Unused Funds
If your child doesn’t use all the funds in their 529 plan, you have several options. You can change the beneficiary to another family member or use the funds for graduate school. Starting in 2024, you can also roll over unused 529 plan funds to a Roth IRA for the same beneficiary. This rollover allows you to transfer up to $35,000 of 529 plan funds to a Roth IRA over the beneficiary’s lifetime, providing a significant opportunity for tax-advantaged retirement savings.

By understanding these lesser-known aspects of 529 plans, you can optimize your savings strategy for educational expenses. From state tax benefits and flexible use of funds to minimal impact on financial aid, 529 plans offer a variety of features that can be tailored to your family’s needs.

Sources: forbes.com, savingforcollege.com, & fidelity.com

Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.

Any opinions are those of author and not necessarily those Raymond James Financial Services, Inc., or of Raymond James.  The information contained in this presentation does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.

Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.