Firefighter Families’ Guide to 529 College-Savings Plans

May 29 (5/29) is celebrated as “529 Day” – a reminder to start saving for college. For firefighter families, it’s a great time to consider how the soaring cost of education can impact your future. The price of college has been climbing far above general inflation. For example, the average total cost of attendance (tuition, fees, housing, etc.) for one year at a public four-year university is now around $27,000, and at a private university it’s about $58,000.[1] These costs have grown faster than normal consumer prices – between 1980 and 2004, college tuition inflation averaged over 7% per year, while general inflation was about 4%.[2] Even textbooks have seen extreme price hikes, increasing 1,041% from 1977 to 2015 (more than three times the rate of inflation).[3] In short, college is much more expensive now than it was for the previous generation, and the trend has outpaced ordinary inflation for decades. That’s why planning ahead is critical. Firefighters know the value of preparation, and 529 plans are a tool to prepare financially for your child’s education in the face of these rising costs.

What Is a 529 Plan and How Does It Work?

A 529 plan (named after Section 529 of the IRS code) is a special savings program operated by a state or educational institution to help families save for education. The key feature is that it offers tax advantages to encourage saving. You contribute after-tax money into the account, and the funds can be invested (similar to a 401(k) or IRA, with various investment options). The money then grows tax-deferred, and when you withdraw it for qualified education expenses, the earnings are tax-free at the federal level (and often state tax-free as well).[4] In other words, any investment gains your 529 account earns are not subject to income tax as long as they’re used for eligible education costs. (Contributions themselves are not deductible on your federal taxes, but more on state tax benefits in a moment.)[4]

Qualified education expenses are broadly defined. Of course, it includes college tuition and mandatory fees, but it also covers expenses like textbooks, required supplies, and even room and board (for students enrolled at least half-time).[4] Thanks to recent expansions, 529 funds can also be used for K-12 tuition (up to $10,000 per year for private or religious K-12 school) and for certain apprenticeship program costs.[4] In addition, the funds can go toward trade schools, community colleges, and graduate programs, basically any accredited institution eligible for federal student aid, not just traditional four-year universities. This flexibility means a 529 isn’t only for “college” in the narrow sense; it can help pay for a wide range of educational paths, which is good news for families considering that their child might choose a technical college, firefighting academy, or other career training.

529 Plan Tax Advantages 

The primary benefit is that investment growth is tax-free when used for education.[4] Over 10–18 years, even modest returns can compound significantly without being eroded by taxes. Many states also sweeten the deal by offering a state income tax deduction or credit for contributions to the 529 plan. (There’s no federal deduction, but over 30 states offer a tax benefit for contributing to a 529.)[5] For example, Illinois allows married couples to deduct up to $20,000 in 529 contributions from state taxable income.[6] If you live in a state with an income tax, check your state’s 529 plan benefits – as a firefighter family on a budget, every bit of tax savings helps. Even if your state doesn’t offer a deduction (or you don’t have state income tax), the federal tax-free growth still applies. The bottom line is that a 529 plan functions like a designated “education IRA”, letting you invest money for college and not pay taxes on the earnings.

Ownership and control 

As a parent (or account owner), you maintain control of the 529 account. The child is the beneficiary, but they don’t gain control at 18 – you decide when and how to spend the money on their education. This is helpful for firefighter parents who want to ensure the funds are used responsibly. You can even change the beneficiary to another qualifying family member later if needed (more on that in the myths section). Also, anyone can contribute to the account – you, your spouse, grandparents, other relatives, even friends. For a tight-knit firefighter family community, this means birthday or holiday gifts can be funneled into the college fund. Some plans have easy gift contribution features (like Ugift® or similar programs) that let others chip in. Importantly, there are typically no income limits on who can contribute or benefit from a 529 – unlike some Roth IRAs or other accounts, high earners are not excluded.[7] And there’s no age limit for the beneficiary; you can open an account for a newborn, a teenager, or even yourself if you plan to pursue further education later.

The Power of Starting Early: “Time Makes All the Difference”

When it comes to saving, the earlier you start, the more time your money has to grow – and this is especially true for 529 plans because of the tax-free compounding. Even small contributions add up over nearly two decades. Let’s consider a realistic example:

• If you save $100 per month starting when your child is born, and the account earns a modest 5% annual return, by the time they turn 18 you could have roughly $34,900 saved for college.
• However, if you wait until your child is 9 years old to begin saving (meaning your money only grows for 9 years instead of 18), you’d accumulate only about $13,600 by age 18 with the same monthly $100 contributions.

In this example, doubling the saving timeframe results in an ending fund more than 2.5 times larger. That’s the magic of compounding over time. Starting early reduces the burden on your monthly budget later – you can save smaller amounts, because the earnings snowball. For firefighter families, this is crucial. Your income might rise over time with rank or overtime, but having a head start means you won’t rely on scrambling for extra shifts when college bills hit.