College savings

For many of us, saving for college is a major financial investment. At times, it can seem overwhelming. Now is a good time to plan properly so it doesn’t have to be.

Using a 529 plan may be a good strategy to help cover those costs. A 529 plan is a tax-advantaged savings plan sponsored by states, state agencies or educational institutions. Earnings in a 529 plan grow on a federal income tax-deferred basis and may also be eligible for state tax deductions.

You can use 529 funds to help pay for qualified expenses, including books, supplies and special services, as well as tuition, room and board, and equipment.

Here are some helpful tips:

Tip 1

You can choose a beneficiary

You have control over the plan, including flexibility in naming and changing your beneficiary.

Your beneficiary can be any age. You can generally change your beneficiary to a qualified relative when needed. This flexibility may enable you to establish an educational legacy for current and future generations.

Tip 2

Maximize financial aid eligibility

According to the Department of Education, qualified distributions from a 529 plan do not affect aid eligibility because they do not count as parent or student income.

Tip 3

Look into state tax savings

Depending on the state you live in, contributions to that state’s 529 plan may be eligible for state tax deductions. Don’t overlook this potential benefit when choosing a plan.

Tip 4

Consolidate assets

Consolidating college-funding assets for one beneficiary in a single 529 plan can make them easier to manage.

Depending on plan rules, you may be able to arrange transfers from other accounts. Be sure to check the tax implications with a financial advisor or tax professional.

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.