529 plans defined

Maria Bruno of Vanguard Investment Strategy Group and Christine Benz, Director of Personal Finance for Morningstar discuss 529 plans.

Notes:
For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.

This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

Christine Benz is not affiliated with Vanguard and Vanguard does not make any representation regarding her views.

Investment returns are not guaranteed, and you could lose money by investing in a plan.

Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.  The availability of tax or other benefits may be contingent on meeting other requirements.


TRANSCRIPT

Amy Chain: Hi, I’m Amy Chain, and today I’m joined by Maria Bruno of Vanguard Investment Strategy Group, and Christine Benz, Director of Personal Finance for Morningstar. And today we’re talking about a very important topic, college savings. Please define for us, what is a 529 plan?


Christine Benz:
 It’s a tax-advantaged college savings vehicle. 529s are state sponsored, and you receive tax breaks in a couple of different ways. First of all, you may receive a state tax break on your contribution; and that often happens if you contribute to your home state’s plan, but you may actually be eligible for a tax break even if you don’t contribute to your state’s plan. So it’s a state-by-state thing. You need to check up on the bylaws there. You also enjoy tax-deferred compounding on the money that you’ve got within that college savings plan, within the 529 plan. And then, provided you use the money for higher education expenses, for college or vocational school or community college, that money can come out on a tax-free basis for those qualified expenditures. So some nice tax benefits, really the most generous tax benefits available for college savings, because you can get the most in a 529 than you can in any of the other competing college savings vehicles.

Important information For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans. This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation. Christine Benz is not affiliated with Vanguard and Vanguard does not make any representation regarding her views. Investment returns are not guaranteed, and you could lose money by investing in a plan. Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements. © 2016 The Vanguard Group, Inc. All rights reserved.