What is a 529 college savings plan?
A 529 college savings plan is a type of investment account that can be used for higher-education savings, and is usually sponsored by a state. The name “529” comes from Section 529 of the IRS tax code, which gives these plans special tax breaks to encourage saving for education.
Understanding 529 Basics
You may have questions before you invest, and that’s okay. Let Bright Start help you find the answers you’re looking for.
529 plans make great college savings options.
There are several tax savings benefits that can be received by opening a 529 college savings account. Any earnings grow tax-free and qualified withdrawals are free from federal and state income tax. Learn how you can receive Bright Start tax benefits.
What’s a beneficiary?
A beneficiary is the person that a 529 account is opened for. An account can be opened for a child, grandchild, friend, or even yourself. The beneficiary must be a U.S. citizen or resident alien with a valid Social Security number or other taxpayer identification number.
What happens if the beneficiary doesn’t want to continue his or her education?
There are several options if this occurs:
- Leave the funds in the account in the event your beneficiary (or another member of the family) goes back to school at a later date.
- You can change the beneficiary to another member of the family for their college expenses.
- You can withdraw the funds as a non-qualified withdrawal. The earnings portion (not the amount you contributed) is subject to federal and state income taxes, a 10% federal penalty tax, and subject to Illinois recapture provisions.
529 plans are easy to set up and easy to use.
Accounts can be opened by almost anyone, there are no income limits, and anyone can contribute. You can use a 529 account to pay for qualified higher education expenses at most colleges, universities, and many technical and career schools. See how Bright Start can help you save for college.
You don’t need to be a financial expert to start investing.
529 plans provide options for every level of investor. Before you start investing, review your investment options and consider the investment objectives, risks, and charges and expenses. Interested in investing with Bright Start? Read the Bright Start Program Disclosure Statement to learn more on investing and other important information and visit our Investment Options page.
Other 529 questions to consider
- How much money should I save for college?
- What are some of the other common college savings options?
- What are the benefits of investing early?
- What other resources are available?
Get Your College Savings Started with a Bright Start 529 Account
Ensure the success of your loved one’s future with Bright Start. Our plan provides flexible investment options specifically designed to help you save for college.