College Someday? Think "529" As a Way to Pay

KALAMAZOO, Mich. - June 10, 2016 - PRLog -- A college education can bring lifetime benefits - but you don't want to spend a lifetime paying off the bills. If you're ready to start saving for college, one option to consider is a 529 plan.

A 529 plan is a tax-advantaged way to help your family save and pay for college. And you can use May 29 - or 5/29 - as your reminder to contact your financial advisor about starting or contributing to a 529 plan.

• What Can a 529 Do for Me?

A 529 plan offers:

  • Tax advantages - Any earnings growth is tax-deferred in a 529 plan, and withdrawals are federally tax free when you use them for qualified higher education expenses. In some states, you can even take advantage of an upfront state tax benefit by contributing to your own state's 529 plan.¹

  • Flexibility - If a child or grandchild ends up not needing the account or doesn't spend all the money, you can transfer the account to a qualified family member. And you can use the proceeds to pay for any eligible college, university or vocational school.

  • Control - As the account owner, you control the assets in the 529 plan for the life of the account.

• Can't I Just Borrow the Money Later?

It can be less expensive to try to save for education now than it is to borrow later. For example, if you saved $200 a month over 10 years with an average 7% return, you could end up with $35,000. However, it could cost $400 a month - twice as much - to borrow $35,000 and pay it back over 10 years, assuming a potential student loan interest rate of 7%.²

• We Can Help

Your financial advisor has the tools to estimate the future costs at nearly 3,000 colleges and universities. Together, you can calculate a college savings goal and a strategy to work toward it.

So on May 29, make a note to contact your financial advisor about getting started on your college savings plan.

Important Information:

¹ The earnings portion of withdrawals used for expenses other than qualified education expenses may be subject to federal and state taxes, plus a 10% penalty. Student and parental assets and income are considered when applying for financial aid. Generally, a 529 plan is considered an asset of the parent, which may be an advantage over saving in the student's name. Make sure you discuss the potential financial aid impacts with a financial aid professional. Tax issues for 529 plans can be complex. Please consult your tax advisor about your situation. Edward Jones, its financial advisors and employees cannot provide tax or legal advice.

² Edward Jones estimates. Example is for illustration purposes only and does not reflect the performance of an actual investment.