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Education Planning

529 College Savings Plans

State-sponsored College Savings Plans are one of the most popular ways to save for college today. The savings plans, commonly called 529 plans after the section of the tax code that authorized them, gained even more popularity when Congress made their earnings tax-free.

Eligibility

  • No income level restrictions
  • No age limit on beneficiary or contributor

Investments

College Savings Plans usually offer a mix of investment options that are chosen at the time the account is open. For example, as a contributor you will likely choose from some of the following:

  • Age-based Portfolios. Many 529 plans provide for the automatic transfer of assets from a mix of stock portfolios to more conservative investments as the beneficiary nears college enrollment.
  • All Equity Portfolio
  • All Fixed Income Portfolio
  • Hybrid Portfolios (mix of equities and fixed income)
  • Stable Value Portfolio
  • Single Fund Portfolios

Tax Issues

  • Potential earnings grow tax-deferred
  • Contributions not tax deductible on the federal level
  • May be some tax benefits at the state level depending on plan
  • Earnings on distributions used for qualified education expenses are tax-free upon withdrawal
  • Taxes and penalties apply to nonqualified withdrawals
  • A tax-free transfer of the account to a sibling, cousin or another family member who can use the account for qualified education expenses is allowed

For more information, please contact your Financial Advisor.

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