529 college savings plan benefits

Earnings grow tax-deferred

The difference between tax-free growth and taxable growth (in other investments) can be significant. In the hypothetical chart below, one parent opens a tax-deferred 529 account and a second parent opens an account with taxable earnings. Both make an initial contribution of $2,500 and contribute $100 every month for 18 years (with a 5% rate of return). When their children are ready for college at age 18, the tax-deferred account has over $6,300 more than the same investment in a taxable account.

Tax Deferred Earnings 

The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors.

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