Prepare for the future with education investing.
Learn about the education investing options available to you, and let a financial advisor at Waddell & Reed help you start investing for college today.
When you think higher education, you probably think cost. No surprise. It is expensive. And a variety of factors can impact these costs. Besides tuition and fees, students may have to pay for housing, food, transportation, books, supplies and other related expenses.
No matter when your child starts his or her higher education journey, you can begin the planning process now. By using the College Board Cost of College Calculator, you can estimate the amounts needed to start college in one year, six years or even 18 years based on public in-state, public out-of-state and private college tuitions (a 3% annual increase is built in).
Investing for education
The foundation for a strong future begins with higher education. Today, there are more education funding options than ever before. Plus, when you begin investing early, you put time on your side as you build an education fund.
Careful research and planning can position you to be prepared when your student starts college. However, knowing which option to choose requires an understanding of the features, benefits and tax implications of each.
Education investing options
Talk to an advisor to become more acquainted with the options below and determine which one is right for your family.
529 College Savings Plan
A 529 plan is a simple and smart way to invest for education. It offers you control as the account owner and flexibility in your investment choices. 529 plans are available in nearly every state and are designed so that any U.S. citizen or resident can open an account and invest for college expenses and those associated with public, private or religious K-12 education.
Begin investing when a child is young so funds have the potential to grow over time, tax deferred, until you're ready to make tax-free withdrawals.
- There are no income or age limitations.
- States sponsoring 529 plans may offer their own tax benefits on contributions, including income tax deductions.
- Earnings withdrawn that are not used for qualifying college expenses are subject to a 10% federal penalty.
Learn more about 529 plans and Ivy InvestEd 529 Plan.
Coverdell Education Savings Account (CESA)
A Coverdell Education Savings Account allows you to make an annual nondeductible contribution of $2,000 per child per year to a specially designated investment trust account. The account grows federal income tax free and withdrawals are tax free. Coverdell funds can be used for college expenses as well as K-12 expenses.
- Adjusted Gross Income (AGI) limitations apply, and no contributions are allowed after the beneficiary's 18th birthday.
- Beneficiary must use the funds within 30 days after their 30th birthday unless rolled over to a new beneficiary, except in the case of a special-needs beneficiary.
- Earnings withdrawn from a CESA that are not used for qualifying educational expenses are subject to a 10% federal penalty.
You can save for higher education expenses as the custodian of an account opened in a minor’s name. An UGMA/UTMA allows you to make an irrevocable gift of money to a child. While the assets belong to the minor, you control them until the child reaches legal age in your state.
- There are no income limitations or annual contribution limits. In addition, contributions up to annual gifting limits of $15,000 (or $30,000 if married filing jointly) are gift tax-free.
- Earnings are taxable at the child's rate up to a certain threshold, then taxed at rates for estates and trusts. Withdrawals of contributions are not subject to income tax.
- Once established, the account beneficiaries and owner can not be changed and the account transfers to the child when they reach legal age.
Learn more about saving for higher education.
Contact a Waddell & Reed advisor today to find out how to incorporate education savings into your financial plan.Find an Advisor
Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the Ivy InvestEd 529 Plan. This and other information is found in the InvestEd Portfolios prospectus, and the Ivy Funds prospectus, the Ivy InvestEd 529 Plan Program Overview, and the InvestEd 529 Plan Account Application. All of these items are available from these links or from a financial advisor. Please read the prospectus carefully before investing.
Before investing, non-residents or tax-payers of states other than Arizona should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors than those offered under the Ivy InvestEdSM 529 Plan. Please consult your tax advisor regarding your personal tax situation.
The Ivy InvestEd 529 Plan and shares of InvestEd Portfolios are offered by Waddell & Reed, Inc. as part of the Arizona Family College Savings Program Trust Fund, a 529 plan administered by the Arizona Commission for Postsecondary Education (the “Program”). Waddell & Reed, Inc. is one of multiple financial Institutions eligible to offer Investments under the Program. Accounts a not insured by the State of Arizona, the Trust, the Arizona Commission for Postsecondary Education, or any other governmental entity, Waddell & Reed, Inc., Ivy Distributors, Inc., or any affiliated or related party, and neither the principal deposited nor the Investment return is guaranteed by any of the referenced parties.
Past performance is not a guarantee of future results. Investments into a 529 plan, including the Ivy InvestEd 529 Plan, are not guaranteed, and all investments involve a certain degree of risk. The value of your Ivy InvestEd 529 Plan account will depend upon the performance of the portfolios in which your account is invested and will fluctuate. It is possible that the value of your account may be less than the amount you invested.
The information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to assist in the understanding the issues discussed. Neither Waddell & Reed, Inc. nor Ivy Distributors, Inc., nor their associates offer tax, legal, or accounting advice. You may want to consult with your accountant or tax advisor to discuss your personal situation. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon and risk tolerance.
This information is provided for informational and educational purposes only. Waddell & Reed believes the information has been obtained from sources considered to be reliable, but does not guarantee the accuracy of the information provided. This information is not meant to be a complete summary or statement of all available data necessary for making financial or investment decisions and does not constitute a recommendation.
Please note that the information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to you to assist in understanding the issues discussed. Neither Waddell & Reed, Inc., nor its Financial Advisors give tax, legal, or accounting advice.
This information is not meant as financial or investment advice pertaining to your personal situation. The selection of appropriate investment, insurance or planning options and/or strategies should be made on an individual basis after consultation with appropriate legal, tax and financial advisors. Nothing contained herein is intended as a solicitation or an offer to buy or sell any product or service mentioned and they may not be suitable for all investors.
Securities offered through Waddell & Reed, Inc., Member FINRA/SIPC, are not insured by FDIC, NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal. Insurance products are offered through insurance companies with which Waddell & Reed has sales arrangements. Guarantees provided by insurance products are subject to the claims-paying-ability of the issuing insurance company.
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