5 Important Reasons Why a 529 Savings Plan Could Be Your Secret Retirement Weapon

By Jay Mills

A few years ago retirement used to be about–well, retiring. Perhaps you moved to somewhere warm, bought a condo, and enjoyed the slow, relaxing pace of retirement.

Today, baby boomers are living more active, goal-oriented retirements. They’re starting new businesses, traveling the world, and pursuing new hobbies. A common thread among many boomers is a desire to continue their passion for “lifelong learning.” In fact, according to U.S. News and World Report, the number of baby boomers enrolled in some type of post-secondary education has increased by 20% in the last decade(1). And many are opening 529 Savings Plans and naming themselves as the beneficiaries in order to prepare for these retirement goals.

Here are 5 reasons why you should consider adding a 529 Plan to your retirement strategies:

1. Tax-Deferred Accumulation: Money in a 529 savings plan accumulates free of federal taxes, and withdrawals, if used for qualified education expenses, are also tax-free.

2. Potential State Tax Deduction: Many states offer tax deductions to residents who contribute to their own state’s plan. A few states even offer a state tax deduction regardless of which 529 plan you invest in.

3. Not Just for “College”: Federal Student Aid, an office of the U.S. Department of Education, has a list of over 400 institutions where 529 monies can be used as qualified expenses. This list goes beyond traditional universities and includes trade schools like culinary institutes and golf academies. Search for qualified institutions using https://fafsa.ed.gov/FAFSA/app/schoolSearch.

4. No Income or Age Limitations: Some education funding vehicles have age and income restrictions. Generally, anyone can fund or use a 529 plan for education purposes.

5. Create a Legacy: If you find that you do not use all of your 529 funds, you can easily change the beneficiary from yourself to your grandchildren or other relatives. Even though you name a relative as beneficiary, the 529 is still in your name, which can be very advantageous for the relative when she applies for financial aid.

From the name alone most people would never dream that a 529 Savings Plan could become an important component of their retirement investment strategy, providing the benefits listed above. If the situations above fit your plans to gain further education for a new career or avocation, or if you would like to provide for the education of your heirs, a further investigation of this tool might prove to be of value.

About the author:
Jay Mills is a Financial Advisor with The Oakley Wing Group at Morgan Stanley Smith Barney in Essex, CT. His team is available to help clients learn more about taking advantage of a 529 Savings Plan. You can call or email 860-447-4847 or

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(1) Kim Clark, “Heading Back to College,” US News and World Report, October 26, 2007.

Before investing, investors should consider whether tax or other benefits are only available for investments in the investor’s home-state 529 College savings plan.

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.
Morgan Stanley Smith Barney LLC, member SIPC
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