|Question: Does it make sense to open a 529 account if my child is only two years away from college?|
The answer depends on your reasons for opening the account. If you have a high net worth and want to move money out of your estate, opening a 529 account still makes sense. This strategy lowers the value of your taxable estate and reduces any potential estate taxes due in the future.
If you simply want to save money for college expenses, it may still be worthwhile to open a 529 account. Even if you've waited until your child is a sophomore or junior in high school to start saving for college, you'll potentially enjoy a few years of tax-free growth on your money (assuming it eventually pays for college expenses).
You should check one issue carefully before you open an account this close to college. Some plans impose a minimum holding period, such as one or two years, before any withdrawals can be made (without penalty). If you're going to need this money for the first year of college expenses, plans with withdrawal restrictions would not make sense. Check the individual 529 plans for more details.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.