Time to read: 2 minutes
My wife and I have always given holiday gifts to our nieces and nephews. As each child grew older, we did our best to tailor the presents to their individual personalities; we’d choose books and CDs for one child, and jewelry and gift cards for another. But keeping up with the trends wasn’t easy, and finding the perfect present for each child soon turned into a shopping nightmare each December — until we realized the perfect gift idea was right under our noses.
As a college savings and retirement specialist, I was well-versed in the advantages of 529 plans when it came to saving for college. In fact, I’d opened 529 plans to save for my own children’s education, as had my brothers and sisters. We were all working hard to contribute to our kids’ savings funds, so it made perfect sense to do the same for our nieces and nephews each holiday season.
So, why do I believe a 529 contribution makes a great holiday gift? Let’s start by diving into how a 529 plan works.
How do 529 plans work?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for the costs of a future post-secondary educational experience (college, university, community college or a vocational school). Sponsored by states, state agencies or educational institutions, 529 plans are authorized by Section 529 of the Internal Revenue Code. Although states administer the plans, record-keeping and administrative services are usually delegated to a financial services company. The choice of a 529 plan has no impact on the accredited college, university or vocational school that the student can attend. For instance, a Texas resident could invest in Rhode Island’s 529 plan and use those funds at an Illinois college.
How are 529 plan contributions made and used?
Contributions to a 529 plan are made after-tax and may be used by the beneficiary to pay for tuition, fees, books, supplies and equipment.1 The money may also be used for room and board, as long as the beneficiary is at least a half-time student. Should the child earn a scholarship or postpone a college education, the account owner can change the beneficiary to another qualifying family member.
There is no minimum contribution to a 529 plan account, so anyone can give the gift of college savings. In the past, cash gifts could be placed by the account owner into their child’s 529 plan account — but nowadays, it’s even easier to contribute with Ugift®, a free-to-use service that lets friends and family donate to an education fund.2
Why gift with Ugift® this holiday season?
Using Ugift® is simple and convenient. The 529 plan owner receives a unique Ugift® code for each beneficiary, which they can share with anyone who wishes to contribute. Friends and family can then make an online contribution at Ugift529.com, with no registration or service fees for them, and no added paperwork for the account owner. And for those of you who find the holidays tend to sneak up on you each year, you can even set up recurring contributions.
In fact, you just might want to get into a habit of making a 529 plan gift every year until your friends’ and family’s children finish college. It’s one holiday gift that will never go out of style.
1 Earnings on non-qualified withdrawals may be subject to federal income tax and 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.
2 All gift contributions sent in to Ugift® are invested into the student’s 529 plan account and are intended to be used only for qualified college and college-related expenses. Ugift® is only available in 529 college savings plans administered by Ascensus College Savings.
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.
Ascensus College Savings Recordkeeping Services, LLC, is a registered transfer agent and is a direct, wholly owned subsidiary of Ascensus College Savings, Inc., and an indirect, wholly owned subsidiary of Ascensus, Inc.
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.