Latest / The College Savings Podcast with Fexingo: 529 Plans, Education Funding, and Student Costs
Why A 529 Plan Is Not Always The Best Option
Lucas and Luna challenge the conventional wisdom that a 529 plan is the default choice for college savings. Drawing on a specific case from the Federal Reserve's 2022 Survey of Consumer Finances, they show that low- and moderate-income families often lose more in penalties and fees than they gain in tax advantages. The episode drills into a single number: families earning under $50,000 per year who used a 529 plan paid an average effective tax penalty of 7.2 percent — compared to a 2.1 percent benefit for high-income households. They discuss alternatives like Roth IRAs and custodial…
The skinny
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