When people plan on saving for college 529 Plans can offer some advantages for growing the college savings money tax-free, but there are also some drawbacks that are discussed in this article. One of the first major downsides is that the money saved with a 529 Plan has to be used for college or else the person who set up the plan could be stuck paying a 10% penalty on investment gains. The plan creator might also be hit with high fees by whoever is the plan administrator. The investment choices in a 529 Plan are also limited and might not be diverse enough to help a person reach their investment goals. A 529 Plan is not always going to be a bad idea and might be beneficial in certain circumstances. It is important for people to be fully informed about the pros and cons of using such an investment plan.
See Maurie Backman, 3 Reasons Not to Open a 529 Plan, My San Antonio, March 28, 2016.
