Those of us who came of age during the greatest economic expansion of the 20th century are now near to retiring or we're already there. We may no longer be earning top dollar but many of us have put away money, earned pensions, established 401k accounts, and are otherwise well-padded for retirement--padded enough that we look at the economy our grown children are dealing with and wonder how we can help with the fiscal challenges that lie ahead for them.
All of which is a long way of saying, some of us are in the position to and would like to give our grown children some pecuniary peace of mind by lifting a small burden here and there. For those of us with grandchildren, one easy-lifting spot is putting money aside for our grandchildren's college education. We don't have to take on the whole burden--who knows how grand a sum it will be a decade or two from now or whether they'll get a scholarship of some sort. But we can contribute.
It's easy enough to set aside money in our own account or set up a separate account with a grandchild's name on it. But a 529 adds a tax bennie to such savings. The money comes out of our taxable estate and, once in the 529, it multiplies [hopefully, it does not shrink] tax free. There is no tax due on it when it's withdrawn--so long as your grandchild withdraws it for education purposes. If your son or daughter has already set up a 529 savings plan, you can contribute. You can even get special coupons to do it on your own. Or you can set one up yourself for each grandchild you choose to help. Setting up a 529 yourself gives you more control over the money. If you find you need the cash after all--for, say, unexpected desire to take a trip around the world--or you change your mind (that grandchild turned out to be an ungrateful wretch) you can ask for the money back, though you'll pay a tax and 10 percent penalty on the withdrawal. But still, it's a way to help out unobtrusively--and give your grown kids some relief about the burdens that lie ahead.
Here's a link to an easy-to-follow briefing on 529s. It's called "15 Facts All Parents Should Know About 529 Plans." And another one that answers a lot of questions grandparents might have.
