Five things to know about 529 plans

Celebrate National 529 College Savings Plan Day by brushing up on your knowledge of college savings plans

Birthdays, Mother’s and Father’s Day, Christmas — There’s no shortage of holidays and special events to look forward to each year. This month is no exception. In just a few days, I’ll be celebrating one of my personal favorites: National 529 College Savings Plan Day.

As you might have guessed, this holiday was created to raise awareness of 529 plans, which offer a flexible, tax-advantaged way to fund a future college education. In the spirit of the holiday, I thought I’d share five noteworthy facts about 529 plans.

1) There are no account minimums to open a 529 plan. Furthermore, 529 plans have no income limitations, meaning anyone can contribute to a plan. Whether you’re funding your own child’s education or inviting friends and relatives to contribute, there are no restrictions on participation.

2) 529 plan funds can be used to pay for most higher education expenses. 529 funds cover a wide array of qualified education expenses, from tuition to room and board, textbooks, computers, and school supplies.

3) 529 plan beneficiaries can be changed. Anyone with a valid Social Security number can be the designated beneficiary of a 529 plan, and they don’t need to be related to the 529 account owner. In the event that the beneficiary no longer needs the funds (for example, if they earn a full college scholarship), the beneficiary can be transferred to another member of the existing beneficiary’s family.

4) 529 plans feature tax-free earnings. Unlike some types of savings accounts, 529 earnings grow tax-free, and funds can be withdrawn with no federal income tax1 when applied to qualified expenses.

5) Many states offer their own 529 plan tax benefits, as well. The majority of US states offer their own 529 plan, which comes with a tax deduction for residents enrolled in the in-state program. However, six states allow tax deductions for contributions to any plan, regardless of the state that runs it. (These states are commonly referred to as tax parity states.) Check out this interactive map to learn more about each state’s tax incentives.

And there you have it: Five facts that make 529 plans a solid choice for college savers, if you ask me. Ready to learn more? Visit CollegeBound529.com, then contact your financial advisor to open a 529 plan for the future college student in your life.

1 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

Important information

Blog header image: Lumina/ Stocksy

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.

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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