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.
Depending on your savings goals, families may also want to consider a new savings option, Trump Accounts. These tax-advantaged investment accounts are designed to help families invest for children under age 18 and can provide a long-term savings plan for children. These accounts are more focused on wealth accumulation than education, so visiting with an advisor about your goals is important.
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.