Unveiling the Truth: 5 Common Myths About AZ529 Plans

As the Treasurer of Arizona and Administrator of the AZ529 Education Savings Plan, Kimberly Yee is focused on expanding educational opportunities for families throughout the state. This summer, she aims to dispel five common myths that may prevent families from effectively saving for their children’s futures through the AZ529 Plan.

Saving for higher education is crucial, yet many families are hesitant. National student loan debt has reached a staggering $1.77 trillion, and studies reveal that 26% of parents are not saving for their children’s education. Surprisingly, six out of ten parents are unaware of the benefits of 529 Plans, which are designed to facilitate education savings. Data shows that families using 529 Plans save approximately 25% more than those who don’t.

Here are the five myths about 529 Plans:

Savings must be used for in-state tuition or at a four-year college:

AZ529 funds can be allocated to accredited institutions nationwide, including community colleges and vocational programs. These savings cover various expenses like tuition, fees, and even internet access.

It’s a use-it-or-lose-it account:

Families don’t forfeit their funds if a child opts out of college. Remaining funds can be transferred to another family member without penalties. Additionally, up to $35,000 can be rolled into the account beneficiary’s Roth IRA, without tax implications.

It will harm my student when applying for financial aid:

Having a 529 Plan has little effect on a student’s financial aid eligibility. The funds in a 529 account are not considered part of parental or student income for aid calculations.

Only parents can open accounts for their children:

Anyone aged 18 or older can establish an AZ529 account and enjoy tax benefits. Grandparents, aunts, uncles, and friends can also contribute.

529 Plans are only for wealthy families:

The AZ529 Education Savings Plans are accessible to families of all income levels. Contributions can start as low as $15 per month, and savings grow tax-free over time.

The AZ529 Plan offers a tax-advantaged way to save for education expenses, free from federal income tax as long as funds are used for qualified expenses. Arizona residents can deduct contributions from state income taxes, with no cap on the number of beneficiaries for deductions.

Establishing a 529 Plan signifies more than just a monetary investment; it represents a commitment to a loved one’s educational future.