The 529 Plan: Your Retirement Account’s Studious Sibling
A tax-advantaged way to fund education for you or a loved one
The 529 plan doesn’t get talked about nearly as much as it should. It offers the same tax advantages as a retirement account, tax-free growth, tax-free withdrawals, but the funds go toward education rather than retirement. For families planning ahead, it’s one of the more efficient tools available.
What is a 529?
A 529 plan is a state sponsored plan that provides tax benefits for educational expenses. You can think of it a bit like a retirement account but for schooling. Similar to a retirement plan, you have control over how your 529 savings are invested.
Who actually owns this account?
An important and unique aspect of the 529 plan is the ownership structure. Unlike a traditional investment account, where the account owner is generally the one receiving the funds, the recipient of the money from a 529 is the beneficiary. The beneficiary of a 529 can be the account owner, but since 529s are generally opened by parents or grandparents, the beneficiary is usually a young relative. Because the account grows tax-deferred, funding a 529 for a young child can be a great benefit 10-20 years down the line when they use it for education expenses!
Show Me the Money: Contributions and Qualified Withdrawals
Money mechanics worth knowing:
• Contributions into a 529 are treated as completed gifts by the IRS and are subject to the annual gift tax exclusion (in 2026, $19,000 per beneficiary if single or $38,000 if married). Contributions above that amount are still allowed but count against your lifetime gift tax exemption.
• Contributions to a 529 are after-tax (similar to Roth), the investments grow tax-deferred, and qualified withdrawals are tax free. Qualified withdrawals always cover higher education (which can include tuition, mandatory fees, books, supplies and certain room and board costs).
• Other qualified withdrawals differ from plan-to-plan but may include: K-12 tuition, apprenticeship programs (including fees, required equipment, books and supplies), and student loan repayment.
• There are no annual limits on withdrawals for higher education but other withdrawals may be subject to annual limits. For example, there’s a $20,000 annual cap on spending for K-12 expenses, and there’s a lifetime maximum of $10,000 for student loan repayment.
What if it doesn’t get used?
If the initial beneficiary doesn’t end up using the money, it can be repurposed.
- Pass it on. The beneficiary of a 529 can be transferred to another individual within the initial beneficiary’s family, like a spouse, sibling, cousin, etc.
- Roth Rollover. Any leftover funds in the 529 can also be transferred to a Roth IRA for the beneficiary as long as the 529 account has been maintained for the designated beneficiary for at least 15 years. The transfer is still subject to the annual Roth IRA contribution limits ($7,500 for 2026) up to a lifetime max of $35,000.
If none of the previous uses apply, an unqualified distribution can be made from the 529. This will likely incur taxes and a 10% penalty on any growth in the plan. The principal is not penalized or taxed, but any distribution from a 529 is pro-rata, which means your withdrawal is taken proportionally from both the principal and the earnings.
Choosing a 529 Plan: Yes, You Can Shop Around
Each state has their own 529 plan, and you’re allowed to shop around for different plans, even from states you don’t live in! However, many states offer tax deductions or credits for residents who invest in their in-state plan. The main differentiator between 529 plans is the tax advantages, fees, and investment options. For example, some states do not conform to the federal rules, so a withdrawal for a Roth rollover or K-12 education could still trigger state tax. Make sure you know what features the plan has before you sign up.
If you need any assistance or advice regarding setting up or contributing to a 529 plan, please reach out to one of our advisors.
529 Tips
- Make sure your money is actually invested. 529 Savings Plans are a good tool for college saving, but they need to be used correctly to get the maximum benefit. One of the biggest advantages of a 529 is tax-free growth on qualified expenses, but that only helps you if your money is actually invested, not sitting in cash. Depending on your 529 plan, your contributions may default into a cash equivalent, so make sure you check your plan to make sure the money you’re putting in there is invested.
- Start early. A 529’s superpower is tax-free compounding over time, as the lack of tax on the growth of the investments is what makes 529s special. If you’re funding a 529 just a few years prior to when you expect to use it, you won’t be capitalizing on the greatest benefit of the plan.
- Don’t overfund. On the other hand, be careful not to overfund the 529 plan. If the 529 goes unused, or if there are excess funds after the beneficiary goes to college/school, the only options that don’t involve a penalty are: rolling over to a Roth (with a $35,000 limit), repaying student loans, or changing the beneficiary. If there is no alternative beneficiary, and if the account has more than $35,000, there’s not much you can do with the excess funds. Try to only put away what you think you’ll use.
If you have any questions about 529 plans, whether it’s contributions, investments, or distributions, reach out to one of our advisors! You can email us at ShepFinTeam@Shepherdfin.com or call us at 844.975.4015. We look forward to hearing from you!
Participation in a 529 Education Savings Plan (529 Plan) does not guarantee that contributions and investment return on contributions, if any, will be adequate to cover future tuition and other education expenses or that a beneficiary will be admitted to or permitted to continue to attend an educational institution. Contributors to the program assume all investment risk, including potential loss of principal and liability for penalties such as those levied for non-educational withdrawals. Check with your state’s guidelines prior to withdrawing the funds.
An investor should consider, before investing, whether the investor’s or designated beneficiary’s home state offers any favorable state tax treatment or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances.
For more complete information, including a description of fees, expenses and risks, see the offering statement or program description.
Growth is a core value at Shepherd Financial, and we’re proud to announce that five team members – David Bauer, Jeff Sharp, Garrett Smith, Matt Tendler, and Brittany Vollmar – have been named partners at the firm, effective immediately.
Each new partner reflected on their time here, citing company values like loyalty, empathy, expertise, and a genuine commitment to serving clients well. Their dedication to listening first and building lasting relationships speaks to the culture that has shaped our success.
David Bauer
Partner | Director – Investment Management, AIF®
Joining the firm in 2015, David Bauer brings over 30 years of industry experience as the Director – Investment Management. He holds the Accredited Investment Fiduciary® (AIF) designation. He is a graduate of Purdue University, where he earned a Bachelor of Science in Financial Counseling and Planning.
What has changed the most about your job since you started here?
The retirement plan investment landscape has changed significantly. Plan menus now offer more options and better customization for employees. That’s a real benefit for participants, but it also raises the bar for what plan sponsors need to understand. Our value add is helping them sort through those choices — explaining what’s available and why it matters — so they can make informed decisions about what’s right for their plan and their participants.
How would you explain your job to a stranger at a party?
You know how most people have a retirement account through work, but have no idea if the fund choices inside it are actually any good? That’s what I do. I build and manage the investment lineups for company retirement plans; deciding what funds go on the menu, watching performance, and keeping an eye on fees so the people using those plans have strong options to choose from.
Jeff Sharp
Partner | Senior Wealth Advisor
Jeff Sharp has spent 20 years advising wealth clients, 11 of them with Shepherd Financial, where he serves as a Senior Wealth Advisor based in Carmel, Indiana. He holds a Bachelor’s degree from Indiana University along with the Series 6, 7, 63, and 66 registrations.
What’s the best piece of advice someone gave you early in your career?
“Just do the right thing for people, and the rest will take care of itself.”
How has the way you approach this work changed since you first started?
When I first started my career as an advisor at a different firm, it was more of a sales-centric role. That was common in the industry at the time and still is to a degree with many firms. Since my time at Shepherd, it’s much less about selling. It has evolved into much more of a consultative role, working firsthand with people who value and trust in the advice I provide, and the relationships I’ve built over the years really bring me joy.
Tell us about a client moment that reminded you why you do this work.
I’ve had the chance to sit down with clients, walk through the numbers with them, and show them exactly what their plan means: that they can retire on their timeline, give generously to causes they care about, or leave a lasting legacy for their family. That news is often met with tears of joy and thankfulness. Nothing tops that.
Garrett Smith
Partner | Senior Wealth Advisor, AIF®
Garrett Smith, now ten years into his time with our team, works directly with the firm’s wealth management clients as a Wealth Advisor based in New Albany, Indiana. A graduate of Indiana University Southeast, he holds the Accredited Investment Fiduciary® (AIF) designation.
Tell us about a client moment that reminded you why you do this work?
When I experienced my first client passing, I had to deliver a life insurance policy to his wife. It was a reminder of why I do this work. Years earlier, we’d made sure his coverage was properly structured and funded. And because of that, his family didn’t just get by, they were set up for generations. This was a pivotal moment for me in my career, where I saw the work come full circle.
What has changed most since you started here?
We’ve grown considerably in size and scale, and with that growth comes more responsibility. But growth hasn’t changed how we work with clients. We still take the time to build real, personal relationships.
Matt Tendler
Partner | Retirement Plan Advisor, AIF®
Matt Tendler brings 13 years of experience advising retirement plan sponsors and is based at Shepherd Financial’s Greenville, Delaware office. He holds a Bachelor of Science in Accounting and Business/Management from Neumann University and the Accredited Investment Fiduciary® (AIF) designation.
Tell us about a client moment that reminded you why you do this work.
One of the most rewarding moments is when a retirement plan committee or participant tells us they feel confident that they have a trusted partner looking out for both the organization and the employees – not just a name, but a familiar face. Retirement plans can be complex and helping clients simplify those decisions while improving outcomes for participants is incredibly meaningful and impactful. Knowing we have helped people and added value reminds me why I chose this career.
How would you explain your job to a stranger at a party?
I help employers build and manage retirement plans that work better for their business and, more importantly, for their employees. That means helping organizations navigate fiduciary responsibilities, improve plan design, educate participants, and ultimately give people a better opportunity to retire with confidence. I coach businesses and individuals in building a successful process to reach their financial goals.
How has the way you approach this work changed since you first started?
Early in my career, I was focused on having all the right answers. Over time, I’ve realized that listening is even more important. Every organization has different goals, challenges, and culture. Today, I spend more time understanding what matters most to a client before offering solutions. The best outcomes come from building long-term relationships based on trust, communication, and service. People remember how you make them feel more than the details of what was actually discussed
Brittany Vollmar
Partner | Retirement Plan Consultant, QKA, QKC, TGPC
Now in her ninth year at Shepherd Financial, Client Relationship Consultant Brittany Vollmar works alongside the firm’s retirement plan clients and their employees every day. She holds a Bachelor of Science from Butler University, along with the Qualified 401(k) Administrator (QKA), Qualified 401(k) Consultant (QKC), and Tax-Exempt & Governmental Plan Consultant (TGPC) designations.
What has changed the most about your job since you started here?
The growth of our organization over the years has been truly incredible. I feel fortunate to work alongside such caring, dedicated, and knowledgeable individuals. Every team member brings unique strengths that make our team stronger. I’m grateful to have been part of Shepherd Financial’s journey over my nine years with the organization.
What’s the best piece of advice someone gave you early in your career?
One of our core values at Shepherd Financial is empathy, and it’s one of the many reasons I know I chose the right career. My role gives me the opportunity to lead with a heart for service every day. Whether we’re helping clients with a big project or answering everyday questions, we want everyone we work with to feel supported, valued, and know they can count on us.
As Shepherd Financial continues to grow, these five leaders will play a key role in shaping our future while staying true to the values that have always defined us. Congratulations to David, Jeff, Garrett, Matt, and Brittany on this achievement. We’re grateful for the passion and expertise each of them brings to our team!