529 Plan
A tax-advantaged savings account for education expenses, where growth and qualified withdrawals are tax-free.
A 529 plan is a state-sponsored account for education savings. Contributions are made with after-tax dollars, but investments grow tax-free and withdrawals for qualified education expenses — tuition, fees, room and board, and more — are free of federal tax. Many states add their own tax deduction or credit for contributions.
529s are flexible in ways many people don't realize: funds can cover K-12 tuition up to a limit, apprenticeship costs, and a lifetime amount toward student loan repayment, and recent rules allow rolling unused balances into a Roth IRA for the beneficiary under specific conditions. A plan only pays qualified expenses for its named beneficiary, though you can change beneficiaries within the family.
For families with multiple children, the hardest part is the overlap years when more than one kid is enrolled at once and costs spike. Mapping that overlap against your savings is the difference between a plan that funds college and one that quietly falls short.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.