A state-sponsored, tax-advantaged investment program that helps save for future college education expenses. There are two types of 529 plans: prepaid tuition plans and college savings plans.
529 prepaid tuition plans allow for parents to lock in tuition at current rates by purchasing tuition credits at present day prices to pay future college tuition costs. Plans are only available in some states, but it is possible to participate in a prepaid tuition plan outside of the account holder's current state of residence.
The individual, entity or beneficiary creating an account.
A charge for managing and administering the 529 plan. This may cover services like record keeping, auditing, and preparing statements and reports. The fee is deducted from funds in the plan based on a percentage of assets. More information about fees is available in the Enrollment Handbook.
The expected return of an investment that is calculated as a percentage of the total amount invested.
The Internal Revenue Code of 1986 and its amendments.
A sales charge investors pay when class B shares are sold within a certain period of time. The CDSC normally declines each year after the shares were first purchased and is eliminated after a set time.
A trust or custodial account in which contributions grow on a tax-deferred basis and withdrawals are tax free if used to pay for qualified educational expenses. Unlike 529 plans, ESAs have annual contribution limits and income restrictions.
An account created for the benefit of a minor, with an adult serving as the custodian. The custodian can be a bank, trust company or other organization. The custodian controls the funds until the child reaches a certain age, at which point the account transfers into the child's name.
The individual, selected by the account owner, who's qualified higher education expenses will be paid by the account. There may be only one account owner and one designated beneficiary per account. The designated beneficiary must have a valid Social Security Number, but is not required to be related to the account owner. The account owner can also be the designated beneficiary.
Accredited educational institutions that offer credit towards a bachelor's degree, associate's degree, graduate-level or professional degrees, or another recognized post-secondary credential. Institutions must be eligible to participate in certain federal student financial aid programs.
A 529 College Savings Plan's Enrollment Handbook provides detailed information about the plan, including investment options, fees, and expenses.
A portfolio with an investment strategy based on the number of years until the beneficiary is expected to enter college. The portfolios automatically become more conservative as the first year of college approaches.
Mutual funds that invest mainly in stocks. Some equity funds may focus primarily on smaller, mid-sized, larger corporations, or on specific market sectors. Equity Funds are also known as stock funds.
Mutual funds that invest in bonds. Some fixed-income funds may focus primarily on short-term, intermediate-term, and long-term maturities. Fixed-Income Funds are also known as bond funds.
A tax on the transfer of property. Specifically, when one person gives another something of value and receives nothing, or less than the full value of the gift, in return.
The Internal Revenue Service is the nation's tax-collection agency and administers the Internal Revenue Code.
Withdrawals from a college savings account used for non-college-related expenses. Non-qualified withdrawals are subject to federal income tax, applicable state income tax, and an additional 10 percent federal penalty tax on earnings.
Includes tuition, fees, books, supplies, and equipment required for a beneficiary's enrollment and attendance at an eligible institution of higher education. Certain room and board expenses are also covered. Qualified expenses include certain additional enrollment and attendance costs for beneficiaries with disabilities.
Withdrawals from a college savings account used to pay qualified higher education expenses of the designated beneficiary. These withdrawals are tax free and cover expenses such as tuition, room and board (if the student is enrolled at least part-time), books, supplies, and other equipment.
The fee charged when you purchase class A shares in a 529 plan.
Section 529 of the Internal Revenue Code specifies the requirements for qualified tuition programs (529 plans).
A 529 College Savings Plan or mutual fund may offer more than one "class" of shares/units to investors working through an adviser. Each class has different fees and expenses.
A portfolio with investments that remain the same and don't change based on the age of the beneficiary. Funds are invested in accordance with a target asset allocation. Static portfolios feature the flexibility to choose from among several investment options that may align with your tolerance for risk, your time horizon, and other factors.
The person the account owner assigns to own the account in the event of the current owner's death or legal incapacity while there is still money in the account.
An expense or other item that can be deducted from annually reported income to reduce the amount of taxable income.
Income that is not currently taxable but will be taxed in the future (e.g., when the income is distributed from the account).
A custodial account that allows an individual to invest for a child's education but is not limited to education savings purposes. If permission is given by the custodian, control over money in an UGMA/UTMA account automatically is transferred to the beneficiary when he or she reaches the age specified in the state's UGMA\UTMA statute.
529 plan portfolios typically invest in a number of investments. The portfolios take on part of the fees and expenses of those securities, and the expense is expressed as a percentage of the plan's assets. These fees are not directly paid, but are reflected within the portfolios daily unit value calculation. Underlying investment expenses include:
Securities issued by State Farm VP Management Corp. For more information, call 1-800-321-7520
Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.
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Neither State Farm® nor its agents provide tax or legal advice.
Not FDIC Insured