Three ways a 529 plan could help your star student earn their stripes in college

A 529 plan can be a powerful tool in your college savings strategy

Three ways a 529 plan could help your star student earn their stripes in college

Time to read: 2 min

Every year, Americans celebrate Independence Day with a host of time-honored traditions. From parades and pool parties to barbecues and fireworks, the American flag is a constant fixture throughout the day, its stars and stripes waving proudly against the summer sky. This July 4, I’m reminded of another special tradition: flying the college flag.

When my children were in high school, every time a graduating senior was accepted into a university, the school would “fly the flag” by displaying that college’s commemorative pennant. It was always a proud moment for that student to see their future school represented, as well as an exciting glimpse into what they might one day achieve through a college education. And when it comes to saving for that degree, I believe there’s no better option than a 529 college savings plan.

Three potential benefits of a 529 college savings plan

  • 529 earnings grow tax-free. 529 plan contributions are made on an after-tax basis, but earnings grow federally tax-free and are not taxed when the money is withdrawn for use toward qualified expenses at any eligible college, university or institution of higher education (including vocational schools).1 Factor in the power of compound savings, and that tax-free status may help families maximize the impact of the money they set aside for college.
  • 529 plans offer access to a wide variety of investments. Account owners can choose from different strategies (such as equities and fixed income) and create a custom portfolio tailored to their family’s needs. Alternatively, they can choose an age-based portfolio, which automatically rebalances investments based on the age of the beneficiary, or a target risk portfolio, which is a pre-packaged strategy for investors with a conservative, moderate or growth-oriented risk tolerance. With a 529 plan, there’s no need to try to conform to a one-size-fits-all approach.
  • 529 funds can be redirected to another beneficiary. Whether a student decides not to attend college or earns a scholarship, there are several reasons that 529 funds may not be needed after all. In these cases, the account owner can simply designate a new beneficiary (including themselves), and the funds can be applied toward their education instead. This gives families a little extra flexibility in using the money they’ve saved – always a good thing in my book.

Independence Day festivities may be all about the American flag – but don’t forget about those college flags, either. Consider a 529 plan for a solid college savings strategy to last the whole year long. For additional information on 529 plans, 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.

Important information

Blog header image: phloxii/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.

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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