Back to Glossary
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs.
In Depth
Contributions to a 529 plan grow tax-free, and withdrawals are also tax-free as long as they are used for qualified education expenses, such as tuition, fees, books, and room and board. These plans are sponsored by states, state agencies, or educational institutions and can be used for K-12 education, college, and even some apprenticeship programs. There are two main types: prepaid tuition plans and education savings plans.
Example
Sarah started a 529 plan for her newborn son, hoping to cover his future college tuition with tax-free growth.