Summer break offers an ideal window to review your 529 college savings plan and ensure your strategy aligns with current rules and your family's needs.
529 plans have expanded well beyond their original purpose. You can now use them for K-12 tuition at private schools, not just college. The SECURE Act 2.0 opened another option: rolling unused 529 funds into a Roth IRA for the beneficiary, subject to contribution limits and a 15-year account history requirement. This flexibility means money left over after college costs no longer faces penalties if redirected properly.
Review your current contributions and investment mix. If your child heads to college soon, shift from aggressive growth funds to stable-value or money-market options to protect balances. For younger children, stock-heavy portfolios typically make sense given the longer timeline. Check whether your 529 plan's investment options still match your goals. Many states offer multiple plan options with varying expense ratios and fund selections.
Coordinate with financial aid planning. 529 accounts owned by parents count as parental assets on the FAFSA, affecting expected family contribution. Student-owned accounts impact aid more heavily. Grandparent-owned 529s have minimal FAFSA impact but trigger reporting requirements on aid applications. Timing withdrawals strategically can reduce the aid calculation hit. Some families benefit from using 529 funds strategically in years with lower expected family contributions.
Check beneficiary rules. You can change 529 beneficiaries to another family member without tax penalties, making plans portable across siblings or cousins. If one child gets a scholarship, redirect those 529 funds to a sibling's education expenses tax-free.
Summer also works for a fresh contribution plan. If you have leftover budget space, funding a 529 now locks in the current year's tax deduction in many states. Some states