Tax-Free Growth Matters in a 529 College Savings Plan
Money you save in a 529 plan may grow faster than money in a comparable taxable account. That’s because the money you save in a 529 plan has the potential to grow tax-free for the life of the account.
Rather than paying taxes on any investment gains, you can keep your earnings in the account so they have the potential to grow even more. Over time, compounded growth gives your money the ability to grow faster than it would otherwise.
Even small amounts can really add up over many years to make a significant difference. And remember – every dollar you save in a 529 account can be more than a dollar earned. That’s because every dollar saved is one less you’ll need to borrow – and pay back with interest later on.
This hypothetical illustration assumes an initial investment of $10,000 and a 5% annual rate of return. The taxable account assumes a 28% federal and a 5% state tax rate. (Please check with your tax advisor to learn if this applies to your state of residence.) This illustration does not represent the performance of any specific account or investment and does not reflect any plan fees or sales charges that may apply. If such fees or sales charges had been taken into account, returns would have been lower.
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