Education Savings Plans
It’s Never Too Early to Start Saving for College
Education is expensive, and it is never too early to start saving for your child’s education. Griggers Wealth Management will help you decide the right path for your education savings and provide expert advice to maximize your output to work towards your goals.
Considering the estimated total cost of education, the needed savings, and your available cash flow to make monthly contributions, we will make a plan for contributing to an education savings plan. Even if your cash flow will not accumulate to cover the full cost of education and the related expenses, starting somewhere is better than not starting at all. And down the road, we can help you navigate your plan’s allowance for financial aid and scholarship applications.
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Compare Education Savings Plans
“529” Prepaid Tuition Plan
“529” Education Savings Plan
Coverdell Education Savings Account
UTMAs
Overview
- Program prepays tuition at today’s prices
- Tax-advantage savings account to accumulate funds for education
- Tax-advantage savings account to accumulate funds for education
- Investment account to accumulate funds for a minor
Federal Income Tax
- Contributions are not deductible
- Growth is tax deferred
- Qualified withdrawals are tax-exempt
- Contributions are not deductible
- Growth is tax-deferred
- Qualified withdrawals are tax exempt
- Contributions are not deductible
- Growth is tax-deferred
- Qualified withdrawals are tax exempt
- Contributions are after-tax gifts and non-deductible
- Unearned income from holdings are taxed at parents’ marginal rate
- Growth is taxed at normal rates
Investment Risk
- In general, these are low-risk because the sponsoring state or organization invests funds to increase as tuition does
- Depending on the investment, the level of risk varies
- Managed by an investment manager
- Gains and losses are possible
- Depending on the investment, the level of risk varies
- Self-directed investment options available
- Gains and losses are possible
- Depending on the investment, the level of risk varies
- Self-directed or managed depending on the situation
- Gains and losses are possible
Contribution Limits
- Specified by the program sponsor, the maximum contribution amount cannot exceed the cost of the beneficiary’s education
- Specified by the program sponsor, the maximum contribution amount cannot exceed the cost of the beneficiary’s education
- Contributions must be in cash
- Contributions cannot exceed $2,000 per year for each beneficiary
- No contribution limit
- Subject to gift tax if above yearly-specified amount
Fund Control
- Most times, the donor is in control. In a custodial account, the beneficiary becomes the owner when they turn 21.
- Most times, the donor is in control. In a custodial account, the beneficiary becomes the owner when they turn 21.
- Most times, the donor is in control. In a custodial account, the beneficiary becomes the owner when they turn 21.
- The minor is the owner, but a custodian helps handle the funds until the minor is 21
Included Expenses
- Primary, secondary, and post-secondary tuition
- Some plans cover room and board options
- Some plans allow the use of excess tuition funds for qualified expenses
- Earnings of a non-qualified withdrawal are taxable and penalized 10%
- Primary and secondary school: tuition and fees covered
- Post-secondary school: tuition, fees, books, supplies, computers, software, and internet access covered
- Room and board costs, apprenticeship expenses, repayment of a qualified education loan
- Earnings of a non-qualified withdrawal are taxable and penalized 10%
- Kindergarten-12th grade and post-high school education: tuition, fees, books, supplies, equipment, room, and board covered
- Earnings of a non-qualified withdrawal are taxable and penalized 10%
- UTMA’s do not have any qualified expenses
- Withdrawals can be taxable and can be used for any expenses
“529” Prepaid Tuition Plan
Overview
- Program prepays tuition at today’s prices
Federal Income Tax
- Contributions are not deductible
- Growth is tax deferred
- Qualified withdrawals are tax-exempt
Investment Risk
- In general, these are low-risk because the sponsoring state or organization invests funds to increase as tuition does
Contribution Limits
- Specified by the program sponsor, the maximum contribution amount cannot exceed the cost of the beneficiary’s education
Fund Control
- Most times, the donor is in control. In a custodial account, the beneficiary becomes the owner when they turn 21.
Included Expenses
- Primary, secondary, and post-secondary tuition
- Some plans cover room and board options
- Some plans allow the use of excess tuition funds for qualified expenses
- Earnings of a non-qualified withdrawal are taxable and penalized 10%
“529” Education Savings Plan
Overview
- Tax-advantage savings account to accumulate funds for education
Federal Income Tax
- Contributions are not deductible
- Growth is tax-deferred
- Qualified withdrawals are tax exempt
Investment Risk
- Depending on the investment, the level of risk varies
- Managed by an investment manager
- Gains and losses are possible
Contribution Limits
- Specified by the program sponsor, the maximum contribution amount cannot exceed the cost of the beneficiary’s education
Fund Control
- Most times, the donor is in control. In a custodial account, the beneficiary becomes the owner when they turn 21.
Included Expenses
- Primary and secondary school: tuition and fees covered
- Post-secondary school: tuition, fees, books, supplies, computers, software, and internet access covered
- Room and board costs, apprenticeship expenses, repayment of a qualified education loan
- Earnings of a non-qualified withdrawal are taxable and penalized 10%
Coverdell Education Savings Account
Overview
- Tax-advantage savings account to accumulate funds for education
Federal Income Tax
- Contributions are not deductible
- Growth is tax-deferred
- Qualified withdrawals are tax exempt
Investment Risk
- Depending on the investment, the level of risk varies
- Self-directed investment options available
- Gains and losses are possible
Contribution Limits
- Contributions must be in cash
- Contributions cannot exceed $2,000 per year for each beneficiary
Fund Control
- Most times, the donor is in control. In a custodial account, the beneficiary becomes the owner when they turn 21.
Included Expenses
- Kindergarten-12th grade and post-high school education: tuition, fees, books, supplies, equipment, room, and board covered
- Earnings of a non-qualified withdrawal are taxable and penalized 10%
UTMAs
Overview
- Investment account to accumulate funds for a minor
Federal Income Tax
- Contributions are after-tax gifts and non-deductible
- Unearned income from holdings are taxed at parents’ marginal rate
- Growth is taxed at normal rates
Investment Risk
- Depending on the investment, the level of risk varies
- Self-directed or managed depending on the situation
- Gains and losses are possible
Contribution Limits
- No contribution limit
- Subject to gift tax if above yearly-specified amount
Fund Control
- The minor is the owner, but a custodian helps handle the funds until the minor is 21
Included Expenses
- UTMA’s do not have any qualified expenses
- Withdrawals can be taxable and can be used for any expenses
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated 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 such state’s qualified tuition program. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
