Several years ago, I read an article1 that detailed what you can do with $10 around the world. The author challenged her fellow reporters across the globe to see how far $10 could take them. From two sub sandwiches in Connecticut to two days of groceries in the Philippines, the answers varied widely depending on each reporter’s location.
That interesting perspective stuck with me over the years, so when I caught wind of another $10 challenge, I was all ears. Aptly named the 529 Ten Dollar Challenge, this initiative was created to raise awareness of one of my favorite topics — 529 plans — by showing that even small contributions to education savings accounts can add up over time. Education savers are currently participating by posting photos of themselves with $10 bills to social media and using the #529TenDollarChallenge hashtag.
As Invesco’s Director of Education Strategies and the proud father of three college graduates, I have plenty of personal and professional experience with 529 plans — so it’s no surprise that this challenge appealed to me on many levels. But for many new parents or first-time contributors, the journey to education savings starts with some questions. Here are five things to know before you take part in your own 529 Ten Dollar Challenge.
- What is a 529 plan?
A 529 plan is an education savings plan intended to help families set aside funds for future education costs. 529 plans were created in 1996 and named after Section 529 of the Internal Revenue Code, and they are sponsored by educational institutions, states or state agencies.
- What are the potential benefits of a 529 plan?
529 savings plans are tax-advantaged, meaning that contributions are after-tax, earnings grow tax-deferred and qualified distributions are tax-free. There is no account minimum to get started and no income limit to contribute.
- What kinds of costs do 529 plans cover?
529 plans can be used to pay for qualified educational expenses at an eligible institution, such as tuition, room and board, books, equipment and school supplies.
- Are 529 plans just for college? Not necessarily. In some states, 529 plans can be used to cover up to $10,000 per year of public, private or religious elementary or secondary school tuition.
- Who can be a 529 plan beneficiary?
A 529 plan can be opened for anyone with a valid Social Security number. While 529 plans are commonly opened for a child or grandchild, there are no age restrictions, and the beneficiary can be changed to a relative of the existing beneficiary without income tax consequences.3
Whether you’re saving for your own child or donating to a friend or relative’s account, why not join the national 529 awareness campaign by making a $10 contribution of your own? It’s a fun way to connect with fellow 529 Ten Dollar Challenge participants while showing your commitment to your favorite student’s future.
Interested in learning more about 529 plans? Visit CollegeBound529.com to explore helpful resources and tools to plan your own education savings strategy.
Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program.
For more information about CollegeBound 529, contact your financial advisor, call 877-615-4116, or visit www.collegebound529.com to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing. Invesco Distributors, Inc. is the distributor of CollegeBound 529.
1 This link takes you to a site outside of invesco.com. Invesco does not guarantee any claims or assume any responsibility for any of the content.
2 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. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.
3 For beneficiary changes to occur without federal or state income tax consequences, the new beneficiary must be a family member of the current beneficiary.
Blog header image: Keith Luke/Unsplash
Director, Retirement and Education Strategies
Thomas Rowley is director of retirement and education strategies and one of Invesco’s most frequently requested speakers. He provides analysis of the evolving retirement landscape and develops actionable strategies to help investors and financial advisors maximize their retirement-planning opportunities. Mr. Rowley regularly shares his insights online at invesco.com/us in addition to his speaking engagements.
Mr. Rowley’s insights reflect more than 20 years of experience in the investment industry. He translates his comprehensive knowledge of retirement planning into lively, clear explanations of the complexities of legislative, investing, tax and social issues.
Mr. Rowley shares his analyses of retirement-related issues through regular personal appearances, continuing education webinars and Web-based commentaries.