Planning For Your Future

529 College Savings Plans

Saving for college?
Allow us to save you some anxiety.

There’s no getting around it: higher education comes with a high price tag. And it grows 4-7% more expensive each year.1

Next to your home, college is the biggest investment most people make. Which means it’s never too early to start saving. The good news is you don’t need a degree in finance to figure out how to pay for your kid’s college education. We can help you understand all your options.

One of the most popular ways to save for college is with a 529 plan. 

529 college savings plans offer a unique combination of features that no other college savings vehicle can match. It has the flexibility of allowing you to either prepay tuition at qualifying universities or invest funds with tax-deferred growth potential for future qualified higher education costs.

  • Federal tax advantages: Contributions and earnings in your account grow tax free if the money is used to pay the beneficiary's qualified education expenses. Just be aware that the earnings portion of any withdrawal that isn’t used for college expenses is taxed at the student’s rate and subject to a 10% penalty.
  • State tax advantages: Many states offer income tax incentives for state residents in specific state 529 plans, such as a tax deduction or tax credit for contributions or a tax exemption for qualified withdrawals.
  • High contribution limits: Most plans let you contribute over $300,000 over the life of the plan.2
  • Unlimited participation: Anyone can open a 529 college savings plan account, regardless of income level.
  • Professional money management: College savings plans are offered by states, but they are managed by designated financial companies who are responsible for managing the plan's underlying investment portfolios. 
  • Flexibility: Under federal rules, you are entitled to change the beneficiary of your account to a qualified family member at any time as well as rollover the money in your 529 plan account to a different 529 plan once a year without income tax or penalty implications.

The 411 on 529 selection. 

Every state offers its own version of a 529 plan. And you may join any plan you like.

Currently, there are over 50 different college savings plans available because many states offer more than one plan. This doesn’t have to leave you in a state of confusion. Just consider these factors when making your selection:

  • Your state’s tax benefits: A majority of states offer some type of income tax break for 529 college savings plan participants—such as a deduction for contributions or tax-free earnings on qualified withdrawals—so make sure to find out the exact scope of the tax breaks, if any, your state offers.
  • Investment options: 529 plans vary in the investment options they offer. Ideally, you'll want to find a plan with a wide variety of investment options that range from conservative to more growth-oriented to match your risk tolerance.
  • Fees and expenses: Fees and expenses can vary widely among plans, and high fees can take a bigger bite out of your savings.
  • Reputation of financial institution: Make sure that the financial institution managing the plan is reputable and that you can reach customer service with any questions.

It takes more than money to make money. It takes time.

The sooner you start saving, the better off you'll likely be in the long run. A good plan is to start with whatever amount you can afford, and add to it over the years with raises, bonuses, tax refunds, unexpected windfalls, and the like. If you invest regularly over time, you may be surprised at how much you can accumulate in your child's college fund. 

A graph showing the costs of a college savings planNote: Table assumes an average after-tax return of 6%. This chart is hypotheical and for illustrative purposes only. It is not intended to represent the performance of any specific  investment. Actual returns will vary and pricipal value will fluctuate. 

Take the next step. 

To learn more about the 529 college savings plan options available in your state, call us today (888) 762-6088 or contact an advisor.

1"Saving for College." Broadridge Investor Communication Solutions, Inc. Concept Piece. 2014
2"529 College Savings Plans." Broadridge Investor Communication Solutions, Inc. Concept Piece. 2014.