Section 529 plans as retirement accounts
DOI:
https://doi.org/10.61190/fsr.v12i4.4773Keywords:
Tax planning, Saving, IRA, Retirement planningAbstract
Section 529 plans were created to provide tax incentives for savings for qualified higher education expenses (QHEE). Earnings in 529 plans are tax-free if withdrawals are made for QHEE, otherwise there is a 10% penalty on the earnings, which are taxed at ordinary rates. Although nonqualified withdrawals are subject to a 10% penalty on the earnings, taxes on the earnings are deferred until withdrawal. This paper examines the use of Sectic n 529 plans as retiirement accounts by comparing after-tax and after-penalty future dollars from Section 529 plans with after-tax future dollar's from ordinary taxable investments and tax-advantaged annuities.
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