529 College Savings Day: The Journey to Higher Education Begins with College Savings
Celebrate the day by opening a college savings account for the child you love
Persistence is everything — just ask Sir Edmund Hillary and Tenzing Norgay, the famed first explorers to summit the world’s tallest mountain, Mount Everest. (Fun fact: That famous peak is located in the Himalayas near Ama Dablam, the mountain pictured in Invesco’s logo.) Several climbing expeditions had come close to reaching the 29,000-foot peak in the years before, but none had succeeded until Hillary and Norgay made history on May 29, 1953.
Now we celebrate 529 College Savings Day on May 29, and it’s worth considering what lessons we can learn from those mountain climbing pioneers. After all, as any parent knows, saving for college does have a lot in common with climbing a mountain: It requires careful preparation, the right gear and the input of an expert.
Prepare for the trek
One of the most common questions parents ask me is, how much will college cost? Unfortunately, there is no one-dollar-amount-fits-all answer — costs vary by public or private university, scholarship money or grants earned, and other factors. But you can help prepare yourself for the journey ahead by using Invesco’s college savings planning calculator to get an idea of what the total cost might be and how much you need to save per month to meet your goal.
In addition, you will want to identify the features of a college savings plan that matter most to you, then do your homework. You can research plans and narrow down your choices at Savingforcollege.com,1 which offers a side-by-side plan comparison by fees, third-party ratings and performance.
Use the right tools
One tool that I believe is essential to college savings is a 529 plan. While there are other options for saving for college, I believe a 529 plan offers several key advantages:
Contributions to a 529 account grow tax-deferred, and withdrawals are tax-free as long as they’re applied toward qualified educational expenses.2
A 529 help can account owners with legacy and estate planning (while avoiding costly gift taxes) by allowing individual contributions up to $14,000 per year — or a single contribution up to $70,000 per beneficiary that is treated as if it were spread over five years.3
Finally, unlike other college savings plans, the account owner retains control over all the assets, with the flexibility to add or withdraw money from the plan at any time (though certain taxes or penalties may apply2). The beneficiary, on the other hand, can only use the account assets toward qualified expenses.
For more on college savings investment vehicles, see my article, College savings savvy: 529s versus Roth IRAs, and visit Comparing college savings plans on CollegeBound529.com. Also at CollegeBound529.com, you can determine whether your state offers a tax benefit for using your in-state 529 plan.
Work with an experienced Sherpa
Like a mountain expedition, saving for college is a multi-step goal and one that requires an expert guide — in this case, your financial advisor. There are so many opportunities and challenges to consider, a trusted financial advisor can map out the best path for your family and help you avoid hazards along the way.
Edmund Hillary is reported to have said, “It’s not the mountain we conquer, but ourselves.” As the parent of three college grads, I know that saving for your children’s higher education can seem daunting — and it sometimes is an uphill climb. Why not use May 29 — 529 College Savings Day — as an opportunity to get started on your college savings journey? Channel your inner Hillary and Norgay to help you reach your goals — and give your children the education they need to make some history of their own.
To learn more about opening a 529 plan for a child you love, reach out to your financial advisor today, and visit CollegeBound529.com.
Read more expert views on college savings plans.
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.
Mr. Rowley has been director of retirement business strategy since 2010. Prior to joining Invesco in 2010, he was in charge of individual retirement plan products and Retirement Marketing at Van Kampen.
Prior to joining Van Kampen in 1996, he was a 401(k) regional sales director with an investment firm. His experience also includes seven years in retirement plan operations and three years as head of a brokerage firm’s retirement help desk. He began his career in the Treasury bond futures pit at the Chicago Board of Trade.
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Invesco is not affiliated with Savingforcollege.com1 and does not endorse any recommendations on the site.
1 This link takes you to a site not affiliated with Invesco. This site is for informational purposes only. Invesco does not guarantee or take any responsibility for the content.
2 Distributions used for nonqualified educational expenses are subject to ordinary income tax plus a 10% penalty on the earnings. For more information, refer to Internal Revenue Service Publication 970.1
3 If the contributor dies during the five-year period, a prorated amount will revert back to the contributor’s taxable estate. For more information, refer to Internal Revenue Service Publication 970.1 Contact your tax professional about your individual situation.
For more information about CollegeBound 529, contact your financial advisor, call 877 615 4116, or visit 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.
The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail products and collective trust funds. Invesco Advisers, Inc. and other affiliated investment advisers mentioned provide investment advisory services and do not sell securities. Invesco Unit Investment Trusts are distributed by the sponsor, Invesco Capital Markets, Inc., and broker-dealers including Invesco Distributors, Inc. Each entity is an indirect, wholly owned subsidiary of Invesco Ltd. PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC, investment adviser. Invesco PowerShares Capital Management LLC (PowerShares) and Invesco Distributors, Inc., ETF distributor, are indirect, wholly owned subsidiaries of Invesco Ltd.All data provided by Invesco unless otherwise noted.
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529 College Savings Day: The journey to higher education begins with college savings by Invesco