Should you fund a 529 college savings plan? Here's what experts recommend.

• A larger, upfront contribution to a 529 savings plan can initiate education funding.
• A certified financial planner from Mercer Advisors, Mari Adam, stated that "the more money you put into a college plan early on, the more it will grow."
• If you withdraw money from your account for non-education purposes, you will typically be subject to a 10% penalty and income taxes on the earnings.

Consider making a larger, upfront contribution to a 529 college savings plan to quickly start an education fund.

Experts suggest that depositing and investing earlier may result in higher returns, as the average account balance in 2021 was $30,287, according to the College Savings Plans Network.

According to certified financial planner Mari Adam, senior wealth advisor at Mercer Advisors in Boca Raton, Florida, the earlier money is put into a college plan, the more it will grow.

You can grow money tax-free for qualified education expenses, including college, vocational school, and up to $10,000 of K-12 tuition per year, with a 529 plan.

You may be eligible for a state tax deduction on contributions, according to Adam.

The contribution limits for 529 college savings plans vary by state, ranging from $235,000 to $550,000, according to Saving for College.

Automated savings are not contributing to 529 plans as much as they could be, with only 37% of plans receiving them.

John Loyd, a CFP and owner at The Wealth Planner in Fort Worth, Texas, advised that the optimal time to invest is when you have the funds readily available, citing historical upward trends in the stock market.

If the beneficiary doesn't require funds for education, there is a risk of overfunding the plan, which would result in owing income taxes and a 10% penalty on nonqualified withdrawals. However, there may be alternative options for the money.

Philip Herzberg, a CFP and lead financial advisor at Team Hewins in Miami, stated that these plans have great portability, allowing you to modify the beneficiary to another family member or even a future child after they are born.

Super funding 529 plans

Another option for wealthy families looking to minimize future estate taxes through gifting is to consider super funding a 529 plan.

In 2022, you can give away up to $16,000 per gift without owing federal gift tax, and many people won't owe taxes on larger amounts as well.

Loyd stated that many individuals do not encounter gift tax problems.

The federal estate and gift tax lifetime exemption is currently $12.06 million per person in 2022. However, it will decrease to $5 million adjusted for inflation in 2026 when part of former President Donald Trump's signature tax law sunsets.

To avoid gift tax, you can "super fund" a 529 plan with five years of contributions at once, thereby removing that money from your estate if you expect it to be larger than either of the amounts when you die.

If you have an estate over the lifetime exemption and are single, you can contribute up to $80,000 in 2022 without paying gift tax (or $160,000 if your spouse agrees to "split" gifts).

"This presents an excellent chance to fund your college aspirations," Adam remarked.

Recent stock market volatility may present opportunities, Herzberg explained. "You want to take advantage of those depressed prices with a lump sum investment."