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CollegeInvest 529s aren’t the only way to save. Just one of the more beneficial ways.
As you begin your research, we can help you compare options. Here, we’ll help you better understand the difference between our CollegeInvest 529 Savings Plans and trust accounts, Coverdell education savings accounts, Roth Individual Retirement Accounts, U.S. Savings Bonds, and others.
Compare savings options quickly and easily in our college savings funds comparison chart.
CollegeInvest 529 College Savings Plans
These state sponsored savings programs have a variety of tax benefits, such as a dollar for dollar Colorado state tax deduction1. They can be used for a variety of qualified higher education expenses including tuition, room and board, books and required supplies. With flexibility, versatility and a high degree of account control, experts agree 529s are one of the best ways to save for college.
Coverdell Education Savings Account (ESA)
Tax-advantaged education savings vehicle for qualified K-12 and higher education expenses. ESAs are a trust or custodial account in which contributions grow on a tax-deferred basis and withdrawals are tax free if used to pay for a broad range of educational expenses, including private high school tuition. Unlike 529 plans, ESAs have lower annual contribution limits in addition to income and age restrictions.
Education Bond Program (U.S. Savings Bonds)
Series EE (issued after 1989) and Series I Savings Bonds may be used to fund qualified higher education expenses. Federal taxes can be deferred until redemption or maturity, and earnings grow free from state/local income taxes. Unlike 529 plans, contributions are not tax-deductible, and purchases are currently limited to $5,000 annually.
Roth Individual Retirement Account
This traditionally retirement-focused savings vehicle may also be used to fund some college and higher education expenses, similar to 529s. Earnings grow free from federal income taxes while in the account. Withdrawals (taken before the IRA holder is age 59-1/2) used for specific higher education expenses of the IRA holder, spouse, child or grandchild do not incur a tax penalty. Contribution limits on Roth IRAs are less than those of 529s.
Uniform Trust/Gift to Minors Act Account (UTMA/UGMA)
These custodial savings accounts are managed for the benefit of a minor. There are no limits on contributions, but once the minor reaches the age of majority , he/she control the funds – and the money doesn't have to be used for higher education. In addition, putting money into a UGMA account can negatively affect the chances for financial aid since a child's assets are weighed much more heavily than the parents'.
Each of these savings vehicles has their own, specific benefits, limitations, rules and guidance. Carefully read any disclosure statements and detailed information relative to your investment goals or needs, or consult with a tax advisor for their specific tax applications or consequences.
1 Contributions to the Plan(s) are deductible from Colorado state income tax in the tax year of the contribution, up to your Colorado taxable income for that year. Such deductions are subject to recapture in subsequent years in which non-qualified withdrawals are made.
To learn about CollegeInvest’s 529 program, its objectives, risks, charges, expenses, limitations, restrictions and qualifications regarding the Plans’ benefits and potential tax advantages, please read and consider carefully the Program Disclosure Statements (PDS) available at www.collegeinvest.org before investing. Also, check with your or your beneficiary’s home state to learn if it offers tax or other benefits for investing in its own plan. Administered and issued by CollegeInvest.
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