Investing in your child’s education can open countless doors to his or her future professional opportunities.
But college may also be one of the largest expenses your family will face. GEBA can help you select a tax-advantaged savings plan and investment strategy to make this important goal more attainable. We also offer the GEBA Foundation Scholarship Program, a merit-based award, to support deserving students.
Amplify Your Savings With a GEBA 529 College Savings Plan
529 plans are tax-advantaged savings programs designed by Congress to encourage saving for future education expenses. Authorized by Section 529 of the Internal Revenue Code, most are sponsored by states. College Savings Plans can be used to pay a future student’s eligible education expenses at any accredited college, university or technical school in the country. The beneficiary can be your child, grandchild, or even yourself.
Because the earnings in a 529 plan accumulate free from federal taxes, your savings grow more rapidly than with a taxable investment. The compounding benefit of this special tax treatment is most advantageous when you start setting money aside years in advance and contribute regularly.
Advantages of 529 College Savings Plans
Federal Tax Benefits
Investment earnings and withdrawals for eligible education expenses are free from federal income taxes.
State Tax Benefits
Many states also offer tax benefits for 529 plans. For example:
- Virginia residents can deduct contributions of up to $4,000 per year per college savings account. Earnings and withdrawals for qualified expenses are not considered taxable income. If you are over 70, there is no limit.
- In Maryland, residents can deduct $2,500 per year per college savings account. 529 plan earnings and withdrawals for qualified expenses are not considered taxable income.
Check with your state’s college savings agency, state tax authority or your tax advisor for details regarding the tax treatment for the state in which you live.
Ease and Convenience
A 529 plan is an easy and advantageous way to save for education expenses. Contributions can be made by the account owner or other individuals in lump sum or through easy monthly transfers. There are no income limitations.
529 savings programs generally allow funds to be shifted between investment options and even between eligible beneficiaries once per year.
Grandparents may find these plans as an excellent way to leave money to their heirs outside of their estate to avoid estate taxes.
GEBA’s 529 College Savings Plans
GEBA offers our members two premier 529 Plans that are available in all 50 states. GEBA’s experienced Insurance and Financial Consultants can help you select the options that are most appropriate for you.
American Funds CollegeAmerica® 529 Plan, whose mutual fund investment options include:
>American Funds College Target Date SeriesSM Funds – Choose the fund that most closely matches the date you expect to start paying tuition. Each fund’s asset mix automatically grows more preservation-oriented as college approaches.
>American Funds Portfolio SeriesSM Funds – Choose from among the eight portfolio funds in the series, each designed with a single objective, such as growth or preservation.
>The American Funds – Build a customized portfolio from among the 25 funds that range from short-term bonds to global growth stocks.
A prospectus and detailed information regarding any of these funds is available upon request.
The Arizona Family College Savings Program, whose CD (Certificate of Deposit) investment options include:
>InvestorSure® CD – a five-year CD whose yield is tied to the rise in the S&P 500 index. Even if the index declines over the period, your full principal is returned at maturity.
>Fixed Rate CD – a one- or three-year fixed-rate CD.
Certificates of Deposit are offered through the College Savings Bank and are protected up to $250,000 by the FDIC.
An investor should consider, before investing, whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program.
College Savings Plan Limitations
The annual gift tax exclusion for 2013 allows contributions up to $14,000 ($28,000 for married couples) per year per beneficiary into a 529 plan.
You can contribute up to a total of $350,000 per beneficiary in the CollegeAmerica program and $340,000 per beneficiary in the Arizona Family College Savings Plan.
Withdrawals for eligible education expenses are free of federal taxes and some state taxes. However, withdrawals for other purposes are subject to federal income tax plus a 10% penalty.
Saving for college through a 529 plan can impact eligibility for financial aid. Merit-based financial aid is generally not affected, but need-based aid eligibility may be reduced by up to 5.64%. States and private colleges may have their own rules for financial aid. Check with your state college savings agency or specific college for more details.
Start Your Education Savings Plan with a Free Consultation
One of the benefits of your GEBA membership is your access to Insurance and Financial Consultants who understand the options and regulations regarding saving for education. They will be happy to meet with you, discuss your goals and situation, and advise you on appropriate plans and investment options to consider. Request an Appointment to set up a time to discuss your education and investment goals with one of our licensed Consultants.
Because GEBA is a nonprofit association, you can rely on our licensed and experienced Insurance and Financial Consultants to keep your best interests in mind.