The earlier clients start saving, the less they may have to pay out of pocket for their children’s college education. A smart strategy that includes a 529 College Savings Plan can help lower clients’ college expenses-and provide valuable tax benefits.
Many families make the mistake of viewing their retirement savings as a source to fund college education without realizing the potential harm they could be doing to their retirement plans down the road. By working with you to develop a comprehensive financial plan that includes college and retirement savings, clients can save for both at the same time. Just as they make periodic contributions to their retirement plans, they can save for a child’s college education in a systematic,1 affordable way by opening a tax-advantaged 529 College Savings Plan.
The benefits of 529 College Savings Plans include flexible investment options, potential tax-free growth, potential gains from compounded interest and the freedom to choose or change beneficiaries. And, because there are no state residency restrictions, clients have a variety of funding options. Withdrawals are tax-free so long as they’re used to pay for qualified higher education expenses.2 Clients may also be eligible for an additional state tax deduction if they contribute to plans in their state of residence. Some states3 even provide state tax deductions for residents who invest in another state’s plan.
1 Systematic investing does not assure a profit and does not protect against loss in declining markets. Before investing, investors should evaluate their long-term financial ability to participate in such a plan.↩
2 When withdrawals are used for non-qualified expenses, the earnings portion of the withdrawal will be subject to ordinary federal tax any applicable state income tax and an additional 10% federal tax penalty.↩
3 Tax parity states include Arizona, Kansas, Maine, Missouri and Pennsylvania.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or to avoid penalties that may be imposed under U.S. federal tax laws. Clients should contact their own legal or tax advisors to learn more about the rules that may affect their individual situations.↩
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This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or to avoid penalties that may be imposed under U.S. federal tax laws. Clients should contact their own legal or tax advisors to learn more about the rules that may affect their individual situations.
Investments in 529 college savings plans are neither FDIC insured nor guaranteed and may lose some value. Some states offer favorable tax treatment to their residents only if they invest in the state’s own plan. Investors should consider before investing whether their or their 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 and should consult their tax advisor.
Before investing in a plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. Plan disclosure documents contain this and other information about a plan, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com or calling 1.800.CALL OPP (225.5677). Investors should read these documents carefully before investing.