Assumptions: $2,500 initial investment with subsequent monthly investments of $200 for a period of 18 years; annual rate of return on investment of 5% and no funds withdrawn during the time period specified; taxpayer has a 24% Federal income tax rate for all options at the time of contributions and distribution. This hypothetical is for illustrative purposes only. It does not reflect an actual investment in any particular 529 plan or any taxes payable upon distribution. Actual investment returns may be higher or lower than those shown.
Source: CollegeChoiceDirect
529 Plans are state-sponsored investment programs. There is no guarantee by the issuing municipality or any government agency. There may be tax benefits and other advantages to plans offered by your resident state. You should consider the potential benefits (if any) offered to residents by your own state's plan (if available) prior to considering another state's plan. 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. With very few exceptions, if withdrawals are made from a 529 Plan for purposes other than education, they are considered non-qualified withdrawals, and they are subject to federal - and possibly state - tax penalties. Specifically, the earnings portion of the non-qualified withdrawal will be included in the recipient's gross income for federal tax purposes, the earnings will be subject to a 10% federal tax penalty, and in some states, additional state tax penalties may apply to the earnings. As with all tax-related decisions, consult with your tax advisor. Information herein is not intended to be tax, legal or investment advice. Please consult a qualified professional and review the program prospectus or offering statement before investing. Please also note that assets in a 529 Plan could impact the beneficiary's ability to qualify for grants and student loans. Annual asset charges for a 529 plan may be higher than corresponding share classes of underlying mutual funds. Municipal fund securities are sold by an offering statement, which is available from your registered representative. Please carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information about municipal fund securities, please obtain an offering statement and read it carefully before you invest. Investment return and principal value will fluctuate with changes in market conditions such that shares may be worth more or less than original cost when redeemed. Diversification cannot eliminate the risk of investment losses.