Tue Jun 03 13:10:00 UTC 2025: **Summary:**

This article highlights the importance of using 529 plans for education savings, especially given the rising cost of college and its impact on families’ retirement plans. Tricia Scarlata from JPMorgan Asset Management emphasizes the tax-free growth and compounding benefits of 529 accounts compared to simply saving cash. She also warns against borrowing from retirement accounts to pay for education, as it can significantly hinder long-term financial security. Additionally, the article addresses misconceptions about 529 plans, noting their flexibility for various educational expenses and the possibility of rolling over funds into a Roth IRA if the beneficiary doesn’t attend college.

**News Article:**

**Rising College Costs Force Families to Delay Retirement: Expert Advocates for 529 Plans**

**NEW YORK, NY** – The soaring cost of higher education is forcing many American families to postpone retirement, according to recent research from the Society of Actuaries. As college expenses have more than doubled in the last 20 years, financial experts are urging families to prioritize education savings strategies like 529 plans.

On Yahoo Finance’s “Decoding Retirement” podcast, Tricia Scarlata, head of education planning at JPMorgan Asset Management, emphasized the critical role of 529 plans in achieving education savings goals. “If you’re not investing and you’re not potentially leveraging a 529 account, you’re missing out on that tax-free growth and compounding over time,” Scarlata stated. “Cash is just not going to get you there.”

A 529 plan is a tax-advantaged savings account designed specifically for future education expenses. Not limited to college, these accounts can also cover trade schools or K-12 tuition. The funds are invested and grow tax-deferred, with tax-free withdrawals for qualifying expenses. Scarlata demonstrated the potential difference, explaining that a $10,000 initial investment, plus $500 monthly contributions, could yield nearly $42,000 more in a tax-free 529 account compared to a taxable account over 18 years.

Scarlata cautioned against the common practice of borrowing against 401(k) accounts to cover tuition costs, warning that this can significantly derail retirement savings and result in missed employer matching contributions.

She also clarified misconceptions surrounding 529 plans. Even if the beneficiary chooses not to pursue higher education, the funds can be rolled over into a Roth IRA for the beneficiary, up to $7,000 per year (with a $35,000 lifetime cap) after the account has been open for 15 years, offering financial flexibility.

Scarlata concluded that, while planning for education may seem restrictive, it ultimately benefits the entire family’s financial well-being.

Listeners can find more retirement planning advice on “Decoding Retirement,” available on Apple Podcasts, Spotify, and other podcast platforms.

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