529 Flexibility | American Funds

A 529 education savings plan is more flexible than you think.

One of the best things about parenthood is the joy you feel when your baby does something unexpected and amazing. Many of us envision our children going off to a university someday, but there’s no guessing what exciting talents and plans your child will pursue. If the future doesn’t include college, is a 529 savings plan still a good idea? Absolutely!

Mother looking at new baby

Key takeaways

  • Expect the unexpected, and start planning now.
  • Don't worry: If you don’t use it, you won’t lose it.
  • Know your options for a 529 savings plan.

Be prepared for anything.

You're already dreaming about your baby's future, and chances are education will be part of his journey. Saving small amounts in a 529 savings plan now can make a big difference later for all kinds of learning — and will open up even more options. The flexibility of a 529 savings plan is one of its greatest benefits.

Your money, your choice.

You’re willing to put money aside so that college will be within reach for your child. But what if he's on a different path and won’t need that 529 savings plan after all? Rest assured that the money you save in a 529 savings plan is always yours and always accessible.

Take the cash.

Keep in mind that as long as the money in a 529 savings plan is used for a qualified expense, it's tax-free. That's a big perk! If you use it for a nonqualified expense, you’ll pay taxes on any gains, as well as a 10% early withdrawal penalty. (But note that if that dream scholarship comes through, you are allowed to withdraw the amount of that scholarship without penalty.)

A financial advisor can help you craft a strategy that enables you to keep as much as possible of your hard-saved money.

Leave it alone.

If your child isn’t college bound today, it doesn’t mean he won’t change his mind later. Your 529 savings plan can continue to grow tax-free for decades to come, so there’s no rush to make any changes.

Pursue another path.

The money in a 529 savings plan isn’t limited to four-year universities. Community colleges, seminaries, trade schools… any path your child chooses that involves professional training at an accredited institution could be eligible for a 529 savings plan. You can find a full list of accredited choices on FAFSA.

And keep in mind that you can use the funds for more than just tuition and training. Related educational supplies — from textbooks to laptops — are qualified expenses, too.

Use it for primary education.

Maybe a younger child can take advantage of the money you saved in your 529 savings plan. The assets in a 529 savings plan can be used for tuition at private K-12 schools (up to $10,000 a year), but note that not all states include K-12 tuition as a 529 savings plan qualified expense for state tax purposes.

Change beneficiaries.

One of the best perks of a 529 savings plan is that you have the option of transferring the account to another beneficiary. The new beneficiary can use those funds for all the same educational expenses — including college room and board, tuition and books.

You can change the beneficiary at any time, as long as he or she is a member of the family of the previous beneficiary. A member of the family generally includes the beneficiary’s descendants, the beneficiary's brothers, sisters, parents, uncles, aunts, in-laws, spouses — even first cousins. And don't forget, you can be a beneficiary, too.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors, Inc. and sold through unaffiliated intermediaries. 

Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor. 

If withdrawals from 529 plans are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. State tax treatment of K-12 withdrawals varies. Please consult your tax advisor for state-specific details.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.