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How a 529 College Savings Account Differs from a Traditional Savings Account
If you’re researching how to pay for college, you may have found that a 529 college savings account is a good option. But how is it different from a regular savings account?
A 529 plan is a tax-advantaged investment account designed to help pay for future education. It works similar to a 401k where your contributions are invested in portfolios that invest in mutual funds, exchange-traded funds (ETFs), and other similar investments. Your contributions and earnings have the potential to grow with no federal or state income taxes deducted each year, providing the potential for additional investment growth. This unique savings tool is designed for education savings, and you can withdraw funds tax-free if they are used to pay for qualified higher education expenses at most accredited colleges and universities, and many technical and career schools.1
Some states also offer tax benefits. For instance, if you are an Illinois taxpayer and invest in a Bright Start 529 College Savings account, your plan contributions are tax deductible up to $10,000 per year ($20,000 if married and filing jointly).2 And you’ll pay no state income tax on any earnings and withdrawals used for Illinois qualified college expenses like tuition, books, or room and board.1
Almost anyone can open and contribute to a 529 account, and there are no income limits. When you invest with Bright Start, you control the account. There’s no required minimum contribution amount, no fee to open an account, no annual account service fee, and a high maximum account balance. Plus, there’s no requirement for ongoing contributions. You can open an account with just $25, make contributions over time at your convenience, and set up recurring deposit from your bank account or paycheck.
Bottom line, a 529 account is an investment that suits your family’s needs when saving for college. You can learn more about Bright Start’s additional benefits by going here.
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