Finance Maxxing
Retirement Accounts
529 College Savings Plan
Tax-free growth for education expenses; state deductions may apply.
529 plans provide tax-free growth and withdrawals for qualified education expenses. Many states offer additional tax deductions for contributions.
Tax Benefits
| Benefit | Details |
|---|---|
| Federal tax deduction | None |
| State tax deduction | Varies by state |
| Growth | Tax-free |
| Qualified withdrawals | Tax-free |
| Non-qualified withdrawals | Earnings taxed + 10% penalty |
State Deduction Examples
| State | Single Limit | MFJ Limit |
|---|---|---|
| New York | $5,000 | $10,000 |
| Illinois | $10,000 | $20,000 |
| Pennsylvania | $17,000 | $34,000 |
| Colorado | Unlimited | Unlimited |
| Indiana | 20% credit on up to $7,500 | — |
Qualified Expenses
- College tuition, fees, room & board, books
- K-12 tuition (up to $10,000/year)
- Student loan repayment (up to $10,000 lifetime)
- Apprenticeship programs
SECURE 2.0: 529-to-Roth Rollover
Starting 2024, up to $35,000 (lifetime) can be rolled from a 529 to the beneficiary's Roth IRA:
- 529 must have been open for 15+ years
- Subject to annual Roth IRA contribution limits
- Contributions from last 5 years (and earnings) not eligible
Sources
Related Terms
More in Retirement Accounts
401(k) / 403(b) / 457(b)
Employer-sponsored retirement plans with tax-deferred growth.
Traditional IRA
Tax-deductible contributions with tax-deferred growth.
Roth IRA
After-tax contributions with tax-free growth and withdrawals.
Health Savings Account (HSA)
Triple tax-advantaged: deductible, tax-free growth, tax-free withdrawals.
Traditional vs. Roth
Pre-tax now vs. tax-free later — depends on future tax rate.
Roth Conversion
Moving pre-tax retirement assets into a Roth account.
Required Minimum Distributions (RMDs)
Mandatory annual withdrawals from pre-tax retirement accounts.