A Detailed Comparison of selected College Savings Products
|CollegeInvest 529 College Savings Plans||Coverdell Education Savings Account||Roth Individual Retirement Account||Uniform Trust/ Gift to Minors Act Account (UTMA/UGMA)||U.S. Savings Bonds|
|Description||State sponsored, tax-advantaged savings vehicles for qualified higher education expenses.||Tax-advantaged savings vehicle for qualified K-12 and higher education expenses.||Tax-advantaged retirement vehicle that may also be used to fund qualified higher education expenses.||Custodial account managed for the benefit of a minor. The account is an irrevocable transfer of assets in a child’s name. (Cannot recover the funds placed in the account.)||Series EE (issued after 1989) and Series I Savings Bonds that may be used to fund qualified higher education expenses.|
|Income Limits||None||Yes, individuals are subject to Modified Adjusted Gross Income
Individuals: MAGI must be less than $110,000.
Married, Joint: MAGI must be less than $220,000.
|Yes, individuals must meet the Modified Adjusted Gross Income limit.1||None||Federal income tax exemption for interest earned on bonds is limited only to individuals who meet the Modified Adjusted Gross Income limit.1|
|Age Requirements for the Account Owner or Beneficiary||None||Contributions: Beneficiary must be under age 18 unless a Special Needs Beneficiary.
Distributions: Beneficiary must use the account assets by age 30, unless a Special Needs Beneficiary.
|None||Account ownership transfers to the minor upon their reaching the age of majority or the ownership age specified when the trust was set-up.||Purchaser must be at least 24 years old on the Date of Issue (1st day of month purchased).
No limitations on the Beneficiary.
|Ability to Change the Beneficiary||Yes, at any time, to another qualified member of the current Beneficiary’s family, or yourself.||Yes, but only to another member of the current Beneficiary’s family under the age of 30.||Yes. For premature withdrawals (before reaching the age 59-1/2), the earnings portion is subject to 10% penalty unless used for higher education of IRA holder, spouse, child or grandchild.||No||Yes, but limited to bondholder, spouse, or dependent.|
|Where Funds Can be Used||At any eligible college, university, vocational, or trade school including some outside the U.S. 1||For higher education, any eligible college, university, vocational, or trade school including some schools outside of the U.S. 1
For K-12 education, any public, private, or religious school that provides K-12 education.
|For higher education purposes: At any eligible college, university, vocational, or trade school including some outside the U.S.2||No restrictions||For higher education purposes: At any eligible college, university, vocational, or trade school including some outside the U.S. 2|
|Use of Funds Tuition, Required Fees||Tuition, Fees, Books, and Supplies required for attendance.
Room and Board for students attending at least half time in a degree or certificate program (certain limits apply).
|For Higher Education: Tuition, Room and Board, Required Fees, Required Books and Supplies
For K-12 Schools:
Room and Board, Required Fees, Required Books and Supplies, Uniforms, Transportation, After-School Programs, Computer Equipment
|Tuition, Room and Board, Required Fees, Required Books and Supplies||Funds must be used exclusively for the benefit of the minor. There are no restrictions on the specific use of the funds, and they don’t have to be used for educational expenses.
At the age of majority, the child controls the unrestricted use of funds.
|Tuition, Required Fees|
|Maximum Contribution Limit||$350,000 cumulative for all accounts for the same Beneficiary.||The total amount of all contributions to the Beneficiary cannot exceed $2,000/year.
Contributors must meet the Modified Adjusted Gross Income limitations. (See “Income Limits”)
Cannot be accepted after the Beneficiary reaches the age of 18, unless a Special Needs Beneficiary.
|Maximum limit is $5,000 ($6,000 for taxpayers age 50 and older) per account.
Contribution limit is phased out based on Modified Adjusted Gross Income.1
|Unlimited||NONE if purchased as Gifts, otherwise:
EE Bonds:$5,000 face value per year/per person.
I Bonds: $5,000 face value per year/person.
|Contributions State Tax Deductible?||Yes, for Colorado taxpayers. 2||No||No||No||No|
|Federal Income Tax Treatment of Earnings||Tax Exempt while in the account.||Tax Exempt as long as the earnings and the qualified distribution do not exceed the actual expenses of the Beneficiary.||Tax exempt while in the account.||Child’s age is 19 or less, or a Fulltime Student less than 24: First $950 of unearned income is tax free; Next $950 of unearned income is taxed at the Child’s rate (if no earned income); Above $1,900 of unearned income is taxed at the Parent’s marginal tax rate (if no earned income) Child’s age is less than 19, and not a Fulltime Student: All earned or unearned income is taxed at the child’s tax rate||Federal taxes can be deferred until redemption or maturity.
Earnings grow free from state/local income taxes.
|Federal Income Tax Treatment of Qualified Withdrawals||Tax Free 3||Tax Exempt as long as the qualified distribution does not exceed the actual expenses of the Beneficiary.||If the account has been held for five years and the IRA holder is over age 59-1/2, distributions for education expenses are tax-free and penalty-free.
For premature withdrawals, earnings (before reaching the age of 59-1/2) portion is taxed as ordinary income, but penalty-free when used for qualified higher education expenses.
See “Federal Income Tax Treatment of Earnings.”
|You may be able to exclude from your gross income, all or part of the interest received on the redemption of certain U.S. Savings Bonds.1
If you redeem EE Bonds in the first 5 years, you forfeit the 3 most recent month’s interest.
|Annual Limit for Gift Tax Exclusion||$14,000 single/$28,000 married couple per beneficiary in a single year without federal gift tax consequences.4||The “Maximum Contribution Limit ” is below the annual limit for Gift Tax Exclusion.||Not applicable.||$14,000 single/$28,000 married couple per beneficiary in a single year without federal gift tax consequences.||Not applicable. Annual Limit for|
|Footnotes to College Savings Products:||CollegeInvest 529s:
PRIMARY SOURCES: IRS Publication 970, IRS Publication 590, IRS Tax Topics, IRS Tax Tips, TreasuryDIRECT (Savings Bonds)
NOTE: Investment returns are not guaranteed, and you could lose money by investing in the plans. CollegeInvest and its employees are not in the business of providing tax or legal advice to taxpayers. These materials, and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
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.
Investments are not guaranteed by CollegeInvest , the State of Colorado, its agencies, The Vanguard Group, Inc., Upromise Investments, Inc., Legg Mason Global Asset Allocation, LLC, or FirstBank, and may lose value including the principal amount invested. The Direct Portfolio Plan’s portfolio’s, although they may invest in Vanguard mutual funds, are not mutual funds. The guarantee of the Stable Value Plus College Savings Plan is the obligation of MetLife and only to the extent of the Funding Agreement. Smart Choice College Savings Plans are not insured by CollegeInvest, the State of Colorado, or its agencies. However, these funds are FDIC-insured in accordance with the current FDIC coverage limits.
Capacity of Dealer and Other Parties
CollegeInvest is the issuer of plan securities and is the trustee of the plans in accordance with Colorado law. CollegeInvest also oversees the Managers’ activities and provides certain administrative services such as marketing, audit, and financial statements, in connection with the plans.
Upromise Investments, Inc., serves as Plan Manager for the CollegeInvest Direct Portfolio College Savings Plan and has overall responsibility for the day-to-day operations, including effecting transactions. The Vanguard Group, Inc., also serves as Plan Manager and Investment Manager for the CollegeInvest Direct Portfolio College Savings Plan and Vanguard Marketing Corporation, an affiliate of The Vanguard Group, Inc., assists CollegeInvest with marketing and distributing the CollegeInvest Direct Portfolio Plan. Vanguard Marketing Corporation, Distributor and Underwriter.
Legg Mason Global Asset Allocation, LLC is an affiliate of Legg Mason Inc. Legg Mason, Inc., a holding company, with its subsidiaries is a global asset management firm. The firm is headquartered in Baltimore. The primary distributor for the product is Legg Mason Investor Services, LLC.
FirstBank Holding Company serves as the Plan Manager for the CollegeInvest Smart Choice College Savings Plan and has overall responsibility for the day-to-day operations, including effecting transactions. FirstBank also assists CollegeInvest with marketing and distributing the CollegeInvest Smart Choice College Savings Plan. FirstBank - Member FDIC.
MetLife serves as the Investment Manager for the CollegeInvest Stable Value Plus College Savings Plan.
CollegeInvest and the CollegeInvest logo are registered trademarks. Vanguard is a trademark of The Vanguard Group, Inc. Upromise is a registered service mark of Upromise, Inc. Direct Portfolio , Scholars Choice and Smart Choice are registered service marks of CollegeInvest.