What is a 529 plan?

• A. A tax-free savings plan for retirement.
• B. A tax-free savings plan for retirement.
• C. A tax-advantaged savings plan for education expenses in many states.
• D. A health savings account.

Answer: (C)

A 529 plan is a tax-advantaged savings tool designed to pay for education costs. The money you contribute can grow without federal tax until you withdraw it for qualified education expenses, and many states also offer a state tax deduction or credit for contributions. It’s typically controlled by the account owner, with a named beneficiary who can be changed to another family member if plans shift, so the funds stay focused on education. This makes it specifically about funding education, across eligible expenses like college costs (and in some cases K-12 or other qualified education expenses, depending on the plan). It isn’t intended for retirement savings, and it isn’t a health savings account, which follow different rules. So the correct description is a tax-advantaged savings plan for education expenses in many states.