The younger physicians I help with their financial planning often have questions regarding saving for college for their children. So, I thought it would be helpful to write a post to explain what a 529 college savings plan is and if it’s even worth opening.

Like everything else in financial planning, the answer to this question will really depend on your current financial situation and the goals and objectives that you want to achieve.

WHAT IS A 529?

A 529 is a savings account designed for higher education (college).

Yup, that’s it.

You put money in, watch it grow over the next 18 or so years, withdraw from the account during the time your child is in college. Genius, right?

I could give you more details with fancy words, of course, but that is the most simplistic definition. It really is just that easy.


Investing in a 529 makes the most sense when you have all of your other priorities on track.

You can find out if you’re on track by asking yourself a few questions:

Do you know how much money comes in (earned income) and how much money goes out (your spending) every month?
Are you fully saving for your retirement in your 403b/401k and maxing out your IRA’s?
Do you have an adequate emergency fund set up and fully funded?

Saving towards a 529 plan also makes sense when you have a reliable and significant amount of money to contribute and you can contribute the money early in your child’s life.

It really doesn’t make sense to set up a 529 plan for your freshman in high school. The earnings growth potential is quite limited with such a short investment time horizon. Plus, the tax benefits will more than likely not outweigh locking your funds into a 529 account. The longer the length time between now and when your child will need the funds for college, the more it makes sense to invest in a 529.


A 529 will not lower your taxes by contributing exactly it like your 401k does. There are, however, 30 or so states that give a tax deduction if you live in that state and contribute to a plan in that state, but that isn’t always the best option.

There are even more benefits to a 529 plan as well, which I explain in great detail in the full post on Physician Wealth Services. In the full post, I also share the two 529 plans I typically recommend to my clients, when you shouldn’t invest in a 529 plan, and my trick for funding my own children’s 529 plans. Check it out HERE.