A 529 plan could help take your college savings from scary to sweet

Today’s trick-or-treaters are tomorrow’s college students. Are your savings on track?

A 529 plan could help take your college savings from scary to sweet

Tom RowleyTime to read: 2 min

Things have a tendency to get a little bit scary around this time of year — and I’m not just talking about the little ghosts, goblins and ghouls knocking on your door Halloween night. I’m talking about what happens to your wallet.

According to the National Retail Federation’s annual spending survey, Americans spent approximately $9 billion in 2017 (up from $8.4 billion in 2016)1 on Halloween celebrations, including candy, decorations and those cute kids’ costumes.

But before many parents know it, their kids will be swapping Halloween masks for caps and gowns — and those looming college costs may look more scary than sweet.

Consider this: The cost of college has been rising approximately 6% each year. Five years from now, a public or state school education might cost $25,350 per year, while a private institution could cost $56,766 each school year. Looking 18 years ahead, the numbers start getting really spooky. At the same growth rate, in 2035, it could cost $54,070 to attend public college for a year, and a whopping $121,078 to attend a private college or university — no trick.2

So, given the mounting cost of college, perhaps you should start thinking about treating those you love by contributing to a 529 plan.

529 plans: A sweet solution to college savings

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. Legally known as “qualified tuition plans,” 529s are sponsored by states, state agencies or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

In other words, it’s a vehicle that allows families to save for college costs with tax-deferred earnings growth and tax-free distributions. In addition, many states offer a tax break for residents contributing to their plans.

Compared to other kinds of college savings accounts, 529 plans offer relatively few restrictions based on income or contribution level — yet the possible benefits can be significant for the account holder. These may include certain tax advantages, a potentially minimal impact on the financial aid available to the student, and greater control for the account owner over how and when the money is spent.

What’s more, the new tax reform law passed at the end of 2017 expanded the reach of 529 plans. Now, families in some states can use their 529 plan to pay up to $10,000 per beneficiary per year on K-12 tuition expenses — making it a smart option to cover costs as those young trick-or-treaters grow into future college students.

To learn more about the ways a 529 plan could help you prepare for the future, talk to your financial advisor or visit CollegeBound529.com.

1 Source: National Retail Federation annual spending 2017 Halloween survey

2 Source: Ascensus/College Savings College Savings Planner, Sept. 30, 2017

Important information

Blog header image: Monkey Business Images/Shutterstock.com

Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program.

For more information about CollegeBound 529, contact your financial advisor, call 877-615-4116, or visit www.collegebound529.com to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing. Invesco Distributors, Inc. is the distributor of CollegeBound 529.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial advisor/financial consultant before making any investment decisions. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

Thomas Rowley
Director, Retirement and Education Strategies

Thomas Rowley is director of retirement and education strategies and one of Invesco’s most frequently requested speakers. He provides analysis of the evolving retirement landscape and develops actionable strategies to help investors and financial advisors maximize their retirement-planning opportunities. Mr. Rowley regularly shares his insights online at invesco.com/us in addition to his speaking engagements.

Mr. Rowley’s insights reflect more than 20 years of experience in the investment industry. He translates his comprehensive knowledge of retirement planning into lively, clear explanations of the complexities of legislative, investing, tax and social issues.

Mr. Rowley shares his analyses of retirement-related issues through regular personal appearances, continuing education webinars and Web-based commentaries.

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