As students sharpen pencils and parents stock up on school supplies, it’s a natural time to think beyond the classroom—to the future. Whether your child is just starting kindergarten or already in high school, the back-to-school season is a smart time to revisit your education savings goals.
One of the most effective ways to plan ahead? A 529 college savings plan.
What is a 529 Plan?
A 529 plan is a tax-advantaged investment account designed to help families save for education expenses. Contributions grow tax-deferred, and withdrawals for qualified education expenses—such as tuition, fees, books, and supplies—are tax-free at the federal level. Many states, including Iowa, also offer additional tax benefits.
In Iowa, contributions to the state-sponsored ISave 529 plan are deductible from your state income taxes—up to $4,018 per beneficiary in 2025.
How Can You Use 529 Funds?
529 plans are more flexible than ever. Funds can be used for a wide range of educational expenses, including:
- Four-year universities
- Community colleges and trade schools
- Graduate and professional programs
- Certain apprenticeship programs
Recent rule changes have also expanded how 529s can be used:
- Up to $10,000 per year can be applied toward K–12 private school tuition.
- Up to $10,000 (lifetime limit) can be used for student loan repayment.
- Unused funds may be eligible to roll over into a Roth IRA for the beneficiary—up to $35,000 over a lifetime, subject to IRS rules.
These enhancements help ensure your education savings won’t go to waste—even if plans change.
Why Work with a Financial Advisor?
While 529 plans are a great tool, they’re not one-size-fits-all. A financial advisor can help you:
- Select the right 529 plan and investment strategy based on your goals and timeline.
- Understand tax advantages and how they apply to your unique situation.
- Balance college savings with other priorities, like retirement or debt repayment.
- Plan for multiple children or grandchildren
- Decide between in-state and out-of-state plans based on features and fees.
Make This School Year the Start of Something Big
As another school year kicks off, don’t let the long-term get lost in the day-to-day. A little action today can mean more opportunity and less financial stress tomorrow. Whether you’re just starting or looking to enhance an existing plan, talk with a trusted wealth advisor at First Community Trust about how a 529 can fit into your broader financial picture.
Checklist: How to Start a 529 College Savings Plan
1. Define Your Goal
- Who is the beneficiary (child, grandchild, etc.)?
- What type of education are you planning for?
2. Understand the Tax Benefits
- Learn about federal and state tax advantages.
3. Compare Plans
- Start with your state’s plan, then explore others for fees and investment options.
4. Choose Your Investment Strategy
- Pick age-based portfolios or customize based on your risk tolerance.
5. Set Up the Account
- Open an account online and select your investments.
6. Start Saving
- Make an initial contribution (often as low as $25).
- Consider monthly auto-deposits to stay on track.
7. Review Annually
- Reevaluate your goals and contributions each year.
8. Talk to a Financial Advisor
- Get personalized guidance on maximizing your plan’s potential.
529 Plan FAQs: What Parents Ask Most
Q: Is it too late to start a 529 if my child is in high school?
A: Not at all. Even a few years of savings can reduce the need for student loans. Plus, you may benefit from state tax deductions in the meantime.
Q: What can 529 funds be used for?
A: Qualified expenses include tuition, fees, books, supplies, computers, internet, and room & board. Some K–12 tuition, apprenticeships, and student loan repayment also qualify.
Q: What happens if my child doesn’t go to college?
A: You have options: change the beneficiary, save the funds for later education, or roll over unused amounts to a Roth IRA under certain conditions.
Q: Are contributions tax-deductible?
A: Not federally, but earnings grow tax-free. In Iowa, you can deduct up to $4,018 per beneficiary in 2025 when using the ISave 529.
Q: Can grandparents or others contribute?
A: Yes! Anyone can contribute, making 529s a great alternative for birthday or holiday gifts.
Q: Can I lose money in a 529 plan?
A: Like any investment, 529s carry some risk. However, most plans offer conservative, age-based options that reduce risk as your child approaches college.