It’s hard to believe, but another holiday season is upon us – and with it comes the age-old question: “What do I get for the kids in my life?” Every year brings a hot new toy or a new fashion trend … but what if you could give a gift that lasted longer than that? Consider contributing to a college savings plan, and you’ll give the lifelong gift of education.
529 plans: A convenient way to save for the future
The fact of the matter is, college costs are on the rise, and there may be a major gap between expected total expenses and what families can actually afford. That’s why it’s critical that families start saving as early as possible, ideally with a dedicated college savings plan such as a 529 plan.
A 529 plan is a tax-advantaged savings plan designed to encourage saving for a college education. These plans are authorized by Section 529 of the Internal Revenue Code and are sponsored by states, state agencies, or educational institutions (although the selection of a specific 529 plan does not place a limitation on where the student can attend school). There is no account minimum to open a 529 plan, and no income limit to participate.
The money saved in a 529 plan can be used to cover qualified expenses at any accredited college, university, or vocational school in the United States and at some foreign universities. Covered costs include tuition, textbooks, supplies, fees, and room and board, as long as the beneficiary is at least a half-time student. Best of all, contributions grow tax-free in the 529 plan account, while withdrawals aren’t taxed so long as they’re applied to qualified expenses.1
Why 529 plan contributions make a great holiday gift
Anyone can fund a 529 plan, including grandparents, aunts and uncles, and family friends. Contributions can be made via check or online, but services like Ugift can make it even simpler. Account owners receive a unique Ugift code tied to their 529 plan account, which friends and family can use to make direct contributions.
Of course, half the fun of giving a gift is watching the recipient unwrap it. Some programs like CollegeBound 529 offer printable gift certificates to make the contribution even more special. And for those who can’t imagine a holiday without at least one traditional present, consider splitting your gift: Pick one new toy, book, or piece of clothing, and use the rest of your gifting budget to make a 529 plan contribution — it’s a surefire way to make the child and their parents smile this holiday season.
For more information on 529 plans, talk to your financial professional or visit CollegeBound529.com.
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.
Blog header image:Jayme Burrows / 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.
Ugift is a registered service mark of Ascensus Broker Dealer Services, Inc.