Which statement correctly describes a 529 plan?

• A. A savings plan operated by a state designed to help families set aside funds for future college costs
• B. A government grant for education
• C. A private retirement plan
• D. A scholarship program

Answer: (A)

A 529 plan is a state-operated savings plan designed to help families set aside funds for future college costs. It offers tax advantages—growth is tax-deferred, and withdrawals used for qualified higher education expenses are tax-free at the federal level (and often at the state level too). Funds can cover a wide range of college costs, such as tuition, room and board, books, and required equipment. It is not a government grant, a private retirement plan, or a scholarship program, which is why describing it as a state-run savings plan for future college costs is the best fit.