529 Savings Plans

A 529 college savings plan, or Qualified Tuition Program, is a tax-free way to save for education expenses. A 529 lets you save money for a child’s education in an individual investment account.

Benefits of a 529 Account

• Tax-free growth: This is the biggest plus of a 529. You contribute after-tax money, and it grows free of federal income tax and New Hampshire interest and dividends tax.
• Tax-free withdrawals: When you take money out for qualified educational expenses (tuition, fees, books, supplies, room and board), withdrawals are also tax-free.
• School flexibility: In New Hampshire, you can use up to $10,000 per year of 529 funds to pay for K-12 tuition. This means you can pay for private or parochial elementary, middle, and high school using 529 funds.
• Anyone can contribute: Parents, grandparents, family, and friends can contribute to your child’s 529. Ask them to give the gift that keeps on giving: college!

Downsides of a 529 Account

• Educational expenses only: If you use 529 money for non-education expenses, you’ll have to pay federal income tax and New Hampshire interest and dividends tax. You’ll also be hit with a 10% penalty on the money you take out. So you should only open a 529 if you can afford to put aside money for education expenses. Remember, you can take out loans for education but not for retirement!

529 college savings plans are established by states. They are typically managed by an experienced financial institution. You can invest in a New Hampshire 529, or you can choose a different state’s program. Read on to learn about New Hampshire’s 529 options.