Investing can be overwhelming, especially when you want to make sure you are making the right choices with your hard-earned money. Fortunately, 529 plans are an easy-to-understand investment option that can help you grow your education savings.
This article is sponsored by DC College Savings Plan.
Understanding the basics
What is a 529 plan?
A 529 plan is a tax-advantaged way to save for future education costs for yourself or a loved one. Almost anyone can open an account1 and the funds can be used for expenses ranging from tuition, books, and a computer to room and board.
What is a tax-advantaged account?
A tax-advantaged account is any investment that has special tax benefits. In many cases, these types of accounts can help you maximize your returns. With the DC College Savings Plan, you can enjoy tax benefits such as tax-deferred growth, tax-free distributions,2 and a state tax deduction for District of Columbia (“DC”) taxpayers.
How do I enroll?
The DC College Savings Plan is administered by the District of Columbia Office of the Chief Financial Officer, Office of Finance and Treasury. Get started now with as little as $25.
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Ready to invest in your child’s future?
Click here to get started.
4 reasons a 529 plan is a smart investment
The future holds a lot of unknowns—having a plan can help ensure you are prepared. Here are four reasons to consider a 529.
1. Invest at your own pace
Start your account with as little as $25 and as your financial situation evolves, you are free to adjust without penalties. Plus, you can set up recurring contributions from your bank account to put investing on autopilot.
2. Take advantage of numerous tax benefits
Earnings on your 529 plan investments are not federally taxed, and you can withdraw money tax-free for qualified education expenses.2 DC taxpayers can also deduct up to $4,000 for individuals ($8,000 for married couples or domestic partners filing jointly, who have separate accounts). For those considering estate planning, money remaining in a 529 plan is not included in the account owner's estate for federal estate tax purposes.
3. Maintain control
Although anyone—including friends and family—can contribute to your 529 plan account, as the account owner, you retain full control of the funds. This includes deciding how your money is invested and when and how it is distributed. Even if the beneficiary decides not to pursue higher education, the money is still yours and can be rolled over into a Roth IRA for the beneficiary or into another child’s account (please review the 529 plan booklet for additional information). Also, you can withdraw the money and incur a 10% federal tax penalty on the earnings in most cases.
4. Enjoy maximum flexibility
Unlike IRAs or 401(k) plans, which have age restrictions and penalties for early withdrawals, 529 plans offer unmatched flexibility. Adjust your strategy for future contributions at any time, exchange investments twice a year, and change beneficiaries without penalties or federal income tax. Although typically used for eligible four-year colleges, 529 plans can also cover trade schools, community colleges, registered apprenticeships, K-12, and loan repayments.
Start saving today
The DC College Savings Plan helps families across the District save for education in a convenient, flexible, and tax-advantaged way. Whether you are ready to enroll online today or simply want to learn more, we are here to help.
Take the first step to saving today!
Click here to find out more.
1 To be an account owner, you must be a U.S. citizen, a resident alien or an entity that is organized in the U.S., be at least 18 years of age, and have a Social Security number or tax identification number and valid permanent U.S. street address.
2 Earnings on non-qualified distributions may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain distributions are subject to federal, state, and local taxes.
Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program.
For more information about The DC College Savings Plan ("the Plan"), call 800-987-4859, or visit www.dccollegesavings.com to obtain a Program Disclosure Booklet, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.
The Plan is administered by the District of Columbia Office of the Chief Financial Officer, Office of Finance and Treasury. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-to-day operations including recordkeeping and administrative services. Ascensus Investment Advisors, LLC serves as the Investment Manager.
The Plan's Portfolios invest in: (i) exchange-traded funds,(ii) mutual funds and (iii) a funding agreement. Investments in The Plan are municipal securities that will vary with market conditions. Investments are not guaranteed or insured by the Government of the District of Columbia, the District of Columbia College Savings Program Trust, the District of Columbia Chief Financial Officer, the District of Columbia Treasurer, the Trustee for the District of Columbia College Savings Program Trust or any co-fiduciary or instrumentality thereof, the Federal Deposit Insurance Corporation or any instrumentality thereof.
INVESTMENTS ARE NOT FDIC INSURED, MAY LOSE VALUE AND ARE NOT BANK GUARANTEED.
