With your normal day-to-day expenses and long-term goals like retirement to think about, saving for your child's college education can be challenging. To help families set money aside tax free for future college costs, the IRS created state-sponsored 529 plans in 1996.
Your local Edward Jones financial advisor is familiar with your state's 529 plans and can help you think through any questions you might have:
Whether you're new to saving for college or have been socking away money for a while, it's a good idea to work with an Edward Jones financial advisor to walk step-by-step through your strategy. The most important thing is to start soon, while time is on your side.
Anyone – at any age – who plans to attend college can be the beneficiary of a 529 plan. The account owner, not the beneficiary, controls the account and makes all the investment decisions. But if the beneficiary decides not to attend college, the owner can change the beneficiary to another member of the family.
Grandmas, grandpas, family friends, parents … anyone can contribute to a 529 plan, regardless of income. Contribution limits depend on the state's plan but are typically more than $200,000.
The 529's earnings accumulate tax free, and withdrawals are federally tax-free and penalty-free as long as they are used at an eligible educational institution for:
There's a common misconception that state-sponsored 529 plans are only geared to families that plan on sending their children to a state school, but that's not true. “Eligible educational institutions” are any accredited postsecondary schools that offer classes towards a bachelor’s, associate’s, graduate or professional degree. Some vocational institutions and foreign schools are eligible, too.
Some states provide tax incentives to residents who invest in their home state's 529 plan. And six states – Pennsylvania, Arizona, Maine, Missouri, Montana and Kansas – provide for state tax parity, which means contributions to any state plan are eligible for that state's income tax deduction.
College savings plans can impact a student's financial aid. A 529 plan is considered a parental asset, which generally has little impact on financial aid. For more information on your specific state financial aid considerations, talk to your financial advisor.
With so many variables affecting your decision on college savings, you should talk to your local financial advisor to gain his or her expertise on your situation and your state's plan.
Edward Jones receives payments known as revenue sharing from certain mutual fund companies, 529 plan program managers and insurance companies (collectively referred to as “product partners”). For more information see Revenue Sharing Disclosure.