Graduation and adulthood are still years down the road for my two young kids, so my focus now is on setting them up for success when they get there. One way my husband and I are doing that is through 529 college-savings plans.
With these investment accounts, you can set aside money that grows tax-deferred and withdraw it tax-free for qualified education-related expenses, including college tuition and fees, room and board, and computers.
A common concern among parents who contribute to 529s is that their kids won't end up going to college, or that the costs will be lower than expected. Luckily, the qualified uses for 529 money have expanded in recent years.
The One Big Beautiful Bill Act, signed into law last summer, introduced additional eligible expenses, including tuition, books and other fees associated with qualifying non-degree credential programs, such as for plumbing, electrical work, HVAC and welding. You can also withdraw up to $20,000 per year for elementary and secondary school tuition, course materials, tutoring, fees for standardized tests, and more. (Not all states follow the federal rules, so check your state's policies.)
If you end up with leftover money, a compelling option — one that I'm keeping in my back pocket in case my kids don't need all their 529 funds — is the ability to roll over up to a lifetime limit of $35,000 of the 529 balance, tax- and penalty-free, to the beneficiary's Roth IRA.
The 529 plan must have been held for the beneficiary for at least 15 years before you can make this move, and you can't roll over more than the Roth IRA contribution limit ($7,500 in 2026 for those younger than 50) each year.
Even if you withdraw 529 money for non-qualified expenses, all is not lost. You'll pay income tax and a 10% penalty on the investment-earnings portion of the distribution, but not contributions.
Picking a plan
Almost all states sponsor a 529 plan, and you can invest in any of them. More than 30 states offer a tax credit or deduction for contributions. Usually, you can get that tax break only if you invest in your own state's plan.
But in Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio and Pennsylvania, residents get a tax benefit no matter which plan they choose.
If you're shopping among plans, compare features, including the investment options and costs. Most plans offer age-based portfolios that gradually dial down the risk, shifting to more-conservative investments as your child approaches college.
When it comes to minimizing fees, opening an account directly with the state, rather than through a broker, is your best bet. You can compare plans with Saving for College's tool here. The site also rates plans based on performance, ease of use and more.
Read: The Best 529 Plans of 2026
Watch for promotions that could give your savings a boost. May 29 is National 529 Day, and some plan sponsors offer a cash bonus or match to families who open a 529 during a specified window near that date.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
