The 529 education plan
What it is: an account for education costs. Contributions are after-tax, growth is untaxed, and withdrawals are tax-free when spent on qualifying education expenses.
State angle: many states give a deduction or credit for contributing to their own plan. That is often the largest single benefit, and it is entirely state-specific.
Mechanics:
• The beneficiary can usually be changed to another family member
• Non-qualified withdrawals are taxed on the *gains* plus a penalty
• It counts as a parental asset for aid purposes — generally gentler than an asset in the child's name
Chart: half the annual contribution, started nine years earlier, still lands ahead. Time does more work than amount.