College Savings Planning

¹ The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.

² Coverdell Education Savings Accounts (ESAs) involve eligibility requirements and limitations. Contributions are not tax-deductible and are subject to annual contribution limits and income restrictions. Earnings may grow tax-deferred, and distributions are generally federal income tax-free when used for qualified education expenses. To receive favorable tax treatment, withdrawals must be used for qualified education expenses; otherwise, the earnings portion may be subject to ordinary income tax and an additional 10% penalty. Contributions on behalf of a beneficiary are limited in total each year, and the beneficiary must generally be under age 18 at the time of contribution. Funds must typically be used or distributed by age 30, unless the beneficiary qualifies as a special needs beneficiary. Tax rules and benefits are subject to change, and investors should consult a qualified tax or financial professional regarding their individual situation.