Section 529 Savings Plan: Investing for education expenses
Jackson Health System offers and additional way for you to save for a child or loved one’s education – a Section 529 plan. This powerful tool is designed to help employees like you save for future education expenses in a tax-advantaged way.
With most 529 plans you can*:
- Use the money at any eligible school in any state
- Invest without income restrictions
- Withdraw earnings tax-free
- Change beneficiary designation
- Realize enhances gift tax benefits
*Note Section 529 plans can lose value and are not government of FDIC insured. The value of an investment in a Section 529 plan will fluctuate and, when withdrawn, can be worth more or less than its original cost. There is no guarantee that the plan will grow to cover college expense.
Comparing education funding plans
| Section 529 Plan | Coverdell Education Savings Account | Custodial Accounts | |
| Tax advantages | Earnings grow tax deferred and are exempt from federal taxes if distributions are used for qualified expenses. Some states allow for deductionson contributions. | Earnings grow tax deferred and are exempt from federal taxes if distributions areused for qualified expenses. | Earnings more than $2,100 are taxed at trust and estate rates. |
| Nonqualified withdrawal penalty | 10% on earnings | 10% on earnings | None |
| Max contributions per beneficiary** | Vary by state | $2,000 per year | None |
| Change of beneficiary | Yes | Yes | No |
| Income/age limitations | No | Yes | Yes |
| Withdrawal use | Qualified education expenses | Qualified education expenses | Anypurpose as allowed by state law |
| Financial aid owner | Donor | Student | Student |
Some states offer favorable tax treatment to residents only if they invest in their state’s own Section 529 plan. You should consult with a tax advisor regarding the state tax consequences of any investment in a Section 529 plan.
**Federal law allows single taxpayers to contribute up to $19k per year or make a lump-sum contribution of $95,000 to cover five years and be exempt from gift taxes.
Reach out to your Corebridge financial professional to find out if a 529 is right for you.