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529 Education Savings Plan Guide

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Contents: WHAT IS A 529 PLAN?......................................... 1 KEY BENEFITS..... ................................................ 1 TYPES OF 529 PLANS......................................... 2 GETTING STARTED............................................. 2 SMART STRATEGIES ............................................ 4 TIPS FOR SUCCESS............................................. 4 UNUSED 529 FUNDS.......................................... 7 SECURE ACT CHANGES ...................................... 7 NON-QUALIFIED WITHDRAWAL......................... 8 COMMON MISTAKES.......................................... 8

What is a 529 Plan? A 529 PLAN IS A TAX-ADVANTAGED SAVINGS ACCOUNT DESIGNED TO HELP FAMILIES SAVE FOR EDUCATION EXPENSES. Named after Section 529 of the Internal Revenue Code, these plans offer significant tax benefits when funds are used for qualified education expenses.

KEY BENEFITS

CONSIDERABLE TAX ADVANTAGES

» Contributions grow tax-free » Withdrawals are tax-free when used for qualified expenses » Many states offer tax deductions or credits for contributions

HIGH CONTRIBUTION LIMITS » Most plans allow total contributions over $300,000 » No annual contribution limits (though gift tax rules apply)

FLEXIBILITY TO DO MORE » Can be used at most accredited colleges, universities, and trade schools » Covers K-12 tuition up to $10,000 per year » Beneficiary can be changed to another family member

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Types of 529 Plans

EDUCATION SAVINGS PLANS (MOST COMMON) » Investment-based accounts with various portfolio options » Account value fluctuates with market performance » More growth potential over time

PREPAID TUITION PLANS » Lock in current tuition rates at participating schools » Less common and more restrictive » Guaranteed but limited growth potential

GETTING STARTED

CHOOSE YOUR PLAN

» Your state’s plan: Often offers tax benefits for residents » Other states’ plans: May have better investment options or lower fees Compare fees, investment options, and performance

SELECT INVESTMENT OPTIONS » Age-based portfolios: Automatically become more conservative as beneficiary ages » Static portfolios: Maintain consistent risk level » Individual fund portfolios: Choose specific mutual funds

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SET UP CONTRIBUTIONS » Automatic contributions: Set up monthly transfers » Lump sum contributions: Make larger periodic deposits » Gift contributions: Family members can contribute directly

Qualified Expenses COLLEGE AND GRADUATE SCHOOL

K-12 EDUCATION

» Tuition and fees

» Tuition only (up to $10,000 per year)

» Room and board (for students enrolled at least half-time)

TRADE SCHOOLS AND

» Books and required supplies

APPRENTICESHIPS

» Computers and internet access

» Tuition and fees at eligible institutions

» Special needs equipment

Use for Other Education » Professional certifications and trade programs » Continuing education courses at eligible institutions » Computer equipment and technology for education 529 EDUCATION SAVINGS PLAN GUIDE | 3

Smart Strategies

MAXIMIZE TAX BENEFITS

INVESTMENT APPROACH

FAMILY COORDINATION

» Contribute enough to get your state’s maximum tax deduction

» Start with aggressive growth when child is young

» Have grandparents contribute directly to avoid impacting financial aid

» Consider “superfunding” with 5 years of gifts upfront ($90,000 for individuals, $180,000 for couples in 2025)

» Gradually shift to conservative investments as college approaches

» Consider multiple beneficiaries in the same family

» Don’t panic during market downturns— you have time

» Use leftovers for graduate school or transfer to siblings

TIPS FOR SUCCESS TAX ADVANTAGES

PLAN B CONSIDERATIONS

1. Start Early — Even small amounts may grow significantly over 18 years — Time is your biggest advantage with compound growth

» Keep some education savings in regular accounts for flexibility »R emember funds can be used for trade schools and apprenticeships

2. Automate Contributions — Set up automatic monthly transfers — Treat it like any other essential bill

QUICK REFERENCE: ANNUAL LIMITS (2025)

3. Regular Reviews

» Gift tax exclusion: $18,000 per individual, $36,000 per couple

4. Reassess investment allocation annually 5. Adjust contributions based on changing circumstances

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» K-12 tuition: $10,000 per beneficiary

» Superfunding: $90,000 per individual, $180,000 per couple (5-year election)

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What to Do with Unused 529 Funds MAXIMIZE TAX BENEFITS » Transfer to family members » Change beneficiary to siblings, cousins, or other relatives » No tax consequences when transferring to qualified family members — Includes children, grandchildren, nieces, nephews, and even yourself » Save for graduate school » Keep funds for the original beneficiary’s future graduate or professional school » Medical school, law school, MBA programs all qualify Note: No time limit on when funds must be used.

Recent SECURE Act Changes (2024) TAX ADVANTAGES » Roth IRA Rollover: After 15 years, up to $35,000 lifetime can be rolled to beneficiary’s Roth IRA » Must follow annual Roth contribution limits » No taxes or penalties on the rollover amount

STRATEGIC PL ANNING » Keep modest amounts rather than withdrawing immediately » Consider future grandchildren as potential beneficiaries » Coordinate with family members who might need education funding

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Last Resort: Non-Qualified Withdrawal » Pay 10% penalty plus income taxes on earnings portion » Principal contributions come out tax-free » Still may be better than other investment options due to years of tax-free growth

Common Mistakes to Avoid » Over-Saving » Non-qualified withdrawals incur 10% penalty plus taxes on earnings » Plan for realistic education costs » Ignoring Financial Aid Impact » 529 plans count as parent assets (assessed at 5.64% for aid calculations) » Choosing the Wrong Plan » Don’t automatically pick your state’s plan without comparing » High fees can erode returns over time

BOTTOM LINE 529 plans are powerful tools for education savings, offering tax benefits and flexibility that make them ideal for most families. With recent legislative changes providing even more options for unused funds, the risk of “oversaving” has decreased significantly. Start early, contribute regularly, and choose investments appropriate for your timeline. The tax-free growth potential makes these plans particularly valuable for long-term education planning.

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Your child’s future deserves a second opinion. Call us today at 860.567.6411.

Any opinions are those of The Wealth Group Financial Advisors and not necessarily those of Raymond James. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. 529 plans come with fees and expenses, and there is a risk they may lose money or under perform. Most states offer their own 529 programs, which may provide benefits exclusively for their residents. Please consider whether the state plan offers any tax or other benefits. Tax implications can vary significantly from state to state. Certain changes in beneficiary may result in a taxable event. Tax-free withdrawals may be made for qualified education expenses. Otherwise, the deferred earnings portion may be subject to taxes and a 10% penalty. Please consult a qualified tax professional to discuss tax matters. Tax laws and provisions may change at any time. Death of the contributor prior to the end of the five-year period may result in a portion of the contribution to be included in the contributor’s estate. Please consult a qualified tax professional to discuss tax matters. State tax treatment of K–12 withdrawals is determined by the state(s) where the taxpayer files state income tax. Please consult with a tax advisor for further guidance. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period.

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FIND O U T M O RE CALL 203.830.2009 EMAIL THEWEALTHGROUP@w ONLINE UNIONSAVINGS.COM/WEALTH

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NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIP C, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. Investment Advisory services offered through Raymond James Financial Services Advisors, Inc. Union Savings Bank, The Wealth Group and The Wealth Group Financial Advisors are not registered broker/dealers and are independent of Raymond James Financial Services, Inc.