Dreams come in many forms, detailed and vague, broad and narrow. No matter your child’s dreams or interests, he or she will likely go farther with a college degree.
Over a full working life, typical college graduates earn 60 percent more than high school graduates. Those with advanced degrees earn even more.1
But an education isn’t automatic, and it isn’t cheap. College costs are rising steadily, making education funding a major expense for most families.
Median earnings by level of education
For the 2009-10 school year, total charges (tuition, fees, room and board) for in-state students for one year at a four-year public institution reached $15,213, a 5.9 percent increase over the prior year. For a four-year private institution, total charges for one year reached $35,636, a 4.3 percent increase over the prior year.2 For a child born in 2009, the figures are even more daunting. It is projected that total costs for four years at a public institution in 2027 will reach $189,959 and $444,974 for a private institution.3 Outside of buying a home, higher education is one of the most expensive purchases a family will make.
Maximum account balance or yearly contribution limit per beneficiary
Varies by state - maximum balance is until the aggregate balance of all Program accounts per beneficiary is reached ($340,000 for 2009-2010 academic year).
$2,000 annually
$12,000 can be donated per contributor without exceeding the annual federal gift tax exclusion
Taxation of account earnings and qualified withdrawals
Account earnings grow federal income tax-deferred until withdrawn. Withdrawals are federal income tax-free if used for qualified higher education expenses. State and local taxes may apply.
Account earnings grow federal income tax-deferred until withdrawn. Withdrawals are federal income tax-free if used for qualified higher education expenses.
Earnings are taxable on a current basis at the child’s and/or parent’s rate, depending on the amount of income earned. Withdrawals of contributions are not subject to income tax.
Ability to change beneficiaries
Yes
Yes
No
Control of withdrawals
Owner of account
Owner of account
Transfers to child when child reaches legal age
Investment Options
Age-based portfolios, static portfolios and single mutual fund portfolios available with many 529 plans
Wide range of securities
Wide range of securities
State tax deductible contributions
Varies by state
No
No
Qualified use of proceeds
Any accredited postsecondary school in the U.S., book, room and board. 2009 and 2010 computer technology included.
Any qualified K-12 expenses, plus any accredited postsecondary school in the U.S.
Not applicable. Custodian may make withdrawals for a variety of uses for the minor’s benefit.
Penalties for non-qualified withdrawals
10% penalty on earnings
10% penalty on earnings
No
Ownership of assets for financial aid purposes (may vary with private institutions)
Normally considered account owners until withdrawals begin then earnings withdrawn count as beneficiary’s income.
Student
Student
Age restrictions
None
Contributions to account cannot be made after beneficiary’s 18th birthday. Qualified distributions must generally be taken within 30 days after beneficiary’s 30th birthday unless rolled over to a new beneficiary.
Account transfers to child when child reaches legal age.
1 College Board/Education Pays 2007 2 College Board/Trends in College Pricing 2009 3 Assumes a 6% annual cost increase and 4 years of college.
Investors should consider the investment objectives, risks, charges and expenses associated with the InvestEd Plan carefully before investing. This and other information is found in the Waddell & Reed InvestEd Portfolios, Inc. prospectus, and the Ivy Funds prospectus, the InvestEd Program Overview, and the InvestEd Account Application, all of which can be obtained from your financial advisor. Please read these materials carefully before investing. An investor should also consider, before investing whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 college
savings plan.
Investment return and principal value will fluctuate, and it is possible to lose money by investing.
The InvestEd Plan is offered by Waddell & Reed, Inc. as part of the Arizona Family College Savings Program (the "Program"). Waddell & Reed, Inc. is one of multiple financial institutions eligible to offer investments under the Program. Accounts are not insured by the State of Arizona, the Trust, the Arizona Commission for Postsecondary Education, or any other governmental entity, Waddell & Reed, Inc., or any affiliated or related party, and neither the principal deposited nor the investment return is guaranteed by any of the above referenced parties.
The Waddell & Reed InvestEd Portfolios, Inc. are managed by Waddell & Reed Investment Management Company, while the Ivy Funds are managed by Ivy Investment Management Company, both of which are affiliates of Waddell & Reed, Inc. Waddell & Reed InvestEd Portfolios and the Ivy Funds are distributed by Waddell & Reed, Inc., and Ivy Funds Distributor, Inc., respectively.
