Prepare for the future with a college savings plan

College is an important part of your child’s future, but with education expenses on the rise, planning how to pay tuition can be daunting. For the 2024-2025* academic year, the total average annual cost for in-state tuition increased to $24,920. The total out-of-state students paid increased to $41,920. And students attending private colleges paid $58,600.*

Today’s families often have competing financial priorities that can lead to difficult choices. Let’s look at some of the plan features and how they can help you prepare.

Consider the benefits of a 529 plan

These state-sponsored investment programs are intended to help save for higher education. You can establish an account for anyone you want and the beneficiary can be of any age. Some key benefits of 529 plans include:

  • You maintain control of the plan’s assets, and can even transfer the account to another beneficiary
  • The funds are professionally managed
  • Withdrawals for qualified educational expenses are federal income-tax free
  • Some states offer tax advantages for local residents
  • Plan assets are excluded from the contributor’s taxable estate
  • Under new rules, up to $10,000 from a 529 account can be used to repay the beneficiary's student loans
  • 529 plans can now be used to pay for apprenticeship programs
  • Since 2024, eligible 529 plan account owners can rollover up to $35,000 (a lifetime limitation applicable to each beneficiary) from their 529 plan account to a Roth IRA owned by the account's designated beneficiary

Grandparents can make it easier for their adult children to save for retirement by helping fund the grandchildren’s college expenses. Required minimum distributions from tax-deferred retirement accounts may be a source of funds. And up to five years’ worth of the $19,000 annual gift tax exclusion (up to $95,000) per 529 plan beneficiary can be accelerated to fund the 529 without being subject to gift taxes.

College is an exciting time when your children or grandchildren are learning how to be responsible adults. With smart planning now, we can help you and your family avoid worrying about tuition bills or family debt. Contact us today to discuss whether a 529 plan is right for your family. 

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* Based on the 2024-2025 average published charges (enrollment-weighted) for full-time undergraduate education at a four-year institution, including tuition, fees, room and board for one academic year. (Trends in College Pricing and Student Aid 2024, New York: College Board. © 2024 College Board. )

For more information regarding college savings plans, please visit www.collegesavings.org. Participation in a 529 Plan does not guarantee the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses. State programs vary and therefore you should carefully review individual program documents before investing or sending money. Federal income tax on the earnings and a 10 percent penalty on distributions for non-qualified expenses may apply.

RBC Wealth Management is not a tax advisor. All decisions regarding the tax implications of your individual investments should be made in connection with your independent tax advisor.

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Financial advisors may not be registered in all states. Each financial advisor is only licensed to conduct business with investors within the states of registration. Information about state registrations may be obtained from individual or team websites or by contacting the individual directly.