In a 529 college savings plan, what primary benefit should contributors be aware of?

The primary benefit of a 529 college savings plan that contributors should be aware of is that withdrawals are tax-free if used for qualified expenses. This means that when funds from the 529 plan are withdrawn to pay for eligible educational costs, such as tuition, fees, room and board, and other approved expenses, those withdrawals will not be subject to federal income tax. This tax-free growth and withdrawal feature is a significant incentive for contributors since it allows savings to grow without the burden of taxation on earnings, facilitating more effective saving for education over time.

While some states may offer tax deductions or credits for contributions to a 529 plan, this is not universally applicable at the federal level, making tax-free withdrawals for qualified expenses the standout benefit. Additionally, the plan does not guarantee a set rate of return, as it typically consists of investments that can fluctuate based on market conditions.