Lifelong Learners: Set Up a 529 Plan for Yourself

Whether you think of yourself as an old dog or spring chicken in retirement is up to you. Even if you don’t retire early, you still have many years ahead of you to enjoy your free time, or even discover a new interest. If you’d like to continue your education in retirement as part of pursuing another career or just to nurture an interest, you can fund it with a 529 plan.

If you’ve used a 529 plan to contribute to a child or grandchild’s education, you’ll be familiar with how the tax advantaged account works: Funds grow tax-free in the account and can be withdrawn tax free to pay for tuition, books, room and board, or other qualified education expenses. One former accountant took advantage of his 529 plan to study horticulture and conversation using the $5,000 he had saved. He retired at 62 and now runs a farm – talk about a career change!

Each state has its own plan, and it is worth comparing plans since some states offer different deductions, better investing options, and or lower fees. However, most states offer their residents a tax break for contributing to the state’s own plan. Even if you don’t allow much time for the funds to grow in the account, you can still take advantage of the rule that allows you to withdraw immediately and still qualify for a state tax deduction that same year. Michigan, Minnesota, and Montana, and Wisconsin have restrictions on this, however.

Keep in mind that you can’t benefit from both a 529 plan and the federal Lifetime Learning tax credit. The latter is worth 20% of the first $10,000 in tuition you pay per year. If you use the federal Lifetime Learning tax credit, you can pay additional expenses with a 529 account, but the withdrawals will not be tax free.

If you have leftover money in a 529 account originally intended for a child or grandchild, you can use it for your own education. Who said you can’t teach an old dog new tricks? Continuing your education is one way to use your free time in retirement, whether as part of pursuing another career, or just nurturing an interest you didn’t have time for while you were working. If you’re not ready to stop learning in retirement, consider using a 529 plan to finance your retirement goals.

If you have a unique set of retirement goals and aren’t sure how to go about creating a plan to achieve them, contact us. We can help you strategize so that you can finance the retirement you deserve. Visit us online and schedule you no cost, no obligation financial review today.