Education Savings Accounts: Save for College With Merrill (2024)

FAQs

What is a 529 account with Merrill? ›

Beyond their favorable tax treatment, Section 529 plans are a versatile education planning tool offering families a way to invest for a child's future education expenses (more detailed information on qualified withdrawals can be found in the Education Funding Brochure and the Education Planning Comparison Fact Sheet, ...

529 plans. For most people, a 529 savings account offers a mix of benefits that will help you get closer to your K–12 or college savings goal. With these accounts, you can save money on taxes both when you make your contributions and every year—between now and when you'll need the money.

First, the contribution limit for an ESA is only $2,000 per child per year, while there's virtually no limit to 529 plan contributions. And second, with an ESA, you can choose almost any kind of investment—stocks, bonds and mutual funds. Listen up: we like this feature of the ESA.

The account beneficiary can make tax-free withdrawals to pay for eligible education expenses. However, a 529 plan may not be the best choice if you're not sure if your child will go to college, how much money your child will need for college or if you like to be more hands-on with your investments.

You can request a distribution online by signing into your account at www.merrilledge.com. You must complete this form to request a 529 rollover distribution to contribute to a Roth IRA. This transaction cannot be processed verbally or online. The rollover must be made directly from 529 trustee to Roth IRA trustee.

Earmarking your money for something specific, like education, can help motivate you to keep saving. But the tax advantages are the main reason 529 plans stand out from regular savings accounts. On top of tax-free growth, some states allow taxpayers to deduct or get a credit for 529 plan contributions on their taxes.

A 529 plan is a great way to save for your little one's education, but it isn't the only way. You could put some of your college savings in a 529, some in a traditional savings account, and sprinkle a little more into a Roth IRA.

Leave the account intact.

If your child is simply not sure about college or perhaps wants to delay applying, you can keep your 529 plan intact until the child does use it for qualified education expenses.

It's easy to see why Americans don't embrace 529 plans. They often have limited investment options, high fees, complicated rules and anxiety-producing investment risks. All that said, the plans may ultimately be worthwhile for most families, as long as parents choose carefully. Focusing on fees is crucial.

What is better than a 529 plan? ›

Some 529 alternatives include using a custodial account, Roth IRA or Coverdell Education Savings Account.

Once your income is over $110,000, unfortunately you cannot contribute to a child or grandchild, or other family member's Coverdell ESA. If you're married and filing jointly, and your MAGI is between $190,000 and $220,000 the contribution limits decrease and as you reach $220,000, you cannot contribute to a CESA.

Plus, some kids delay attending school for 1-2 years, which could hinder your financial planning. Having multiple 529 plans gives each of your children access to money in their account regardless of whether their siblings are in school.

And when you pull the funds out, as long as they're used for qualified higher education expenses, there's no federal income tax on the distribution and often no state income tax. 529 accounts also receive some favorable treatment for financial aid purposes, so they're really a great way to save for college education.

529 Plan. The primary benefit of 529 accounts is that they often offer tax advantages when used for your child's educational expenses. Unlike 529 plans, custodial brokerage accounts are generally offered by financial companies (investment brokerages) & come with few limitations.

A 529 college savings plan is a state-sponsored investment plan that enables you to save money for a beneficiary and pay for education expenses. You can withdraw funds tax-free to cover nearly any type of college expense. 529 plans may offer additional state or federal tax benefits.

If you are looking for a tax-advantaged way to save for college, a 529 plan may be a good option. A brokerage account may be a better choice if you are looking for more investment options and flexibility.