How do college savings plans work?
According to the Bureau of Labor Statistics, children could face college costs that are 3 to 4 times higher than current prices. While this stat might make saving for college feel unattainable, there are education funding options available to help make it easier.
Funding options
Here’s a comparison1 of the education funding options we can help you with (2022 information):
Things to consider |
529 college savings plan |
Roth IRA |
Uniform gifts / Transfers to minors act |
|---|---|---|---|
How you can use the funds |
Qualified higher education expenses including vocational and trade schools and public, private, and parochial elementary and secondary schools. |
Contributions can be withdrawn at any time without tax or penalty. Earnings are taxed, but not penalized if used for qualified educational expenses. |
Anything benefiting the child |
How much you can contribute |
Varies by state, but total contributions limits are typically over $200,000 per beneficiary. Contributions qualify for the $18,000 annual federal gift tax exclusion ($36,000 for joint filers). |
Up to $7,000 per year per person, plus $1,000 catch-up contribution if age 50 or older. Contributions can be made as long as account owner has income. |
Unlimited, and contributions qualify for the $18,000 annual federal gift tax exclusion ($36,000 for joint filers). |
Income limits |
No limit |
No contribution if MAGI exceeds $161,000 ($240,000 for joint filers) |
No tax deduction allowed. Taxes may be paid at the child’s rate up to certain limits. Taxes are at the parents’ rate thereafter. Gains may be taxed at capital gains rate. |
Taxes |
Federal tax-deferred earnings and withdrawals for qualified expenses. Some states allow tax deductions. | Contributions are made on after-tax basis. No federal income tax on earnings for qualified distributions. |
No tax deduction allowed. Taxes may be paid at the child’s rate up to certain limits. Taxes are at the parents’ rate thereafter. Gains may be taxed at capital gains rate. |
Account control |
Generally, control of the assets remains with the account owner. |
The account owner maintains control of the assets. |
Generally, assets become the child’s property at age 18 or 21 (depending on state). |
College options |
No restrictions |
No restrictions |
No restrictions |
Beneficiaries |
Can be changed to another family member |
Can be changed |
Cannot be changed |
Ready to start?
Find a local rep or call us at 866-COUNTRY (866-267-6879). We'll help you find a plan that works for you.
COUNTRY Financial® is a family of affiliated companies (collectively, COUNTRY) located in Bloomington, IL. Learn more about who we are.
1The information contained herein is general and should not be considered legal or tax advice. Laws of your particular state and your particular situation may significantly affect the general information presented herein. The availability of the tax or other benefits mentioned above may be conditioned on meeting certain requirements. State tax deductions mentioned here may only be available if you invest in a 529 plan offered by the state in which you reside. COUNTRY Financial and our representatives cannot give tax or legal advice. You should consult your attorney or tax advisor regarding your specific legal or tax situation.
COUNTRY Financial® representatives cannot give tax or legal advice. Please consult legal and tax counsel of your choice regarding your personal circumstances.
Diversification, rebalancing, and asset allocation do not ensure a profit or protect against loss in a declining market.
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May lose value
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Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®.
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COUNTRY® Capital Management Company is registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board (MSRB). An investor brochure describing protections that may be provided by MSRB rules and how to file a complaint with an appropriate regulatory authority is available at www.msrb.org.
For 529 plans, investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer’s official statement. The official statement should be read carefully before investing.
529 College Savings Plans offered by each state differ in options and benefits. The plan for you depends on your specific objectives and circumstances. Please consider each plans investment options, fess, and state tax implications. You should consult your attorney or tax advisor regarding your specific legal or tax situation.
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