Benefits and Features: Tax Advantages of 529 Plans

Accumulate savings faster with tax-deferred growth

The money you earn in a 529 plan is not subject to federal or state income taxes as long as it remains in the plan. This can help your account grow faster since all of your earnings can be reinvested, increasing returns with tax-free compounding. In addition, no federal or state taxes are due to the federal government or to most states* when money is withdrawn from your 529 account and applied to qualified expenses: tuition, room and board, books, supplies, fees and required equipment at most colleges, graduate schools and universities.

The Value of Tax Deferred Growth Chart

The returns are hypothetical and do not represent the performance of any investment. This illustration assumes that no withdrawals are made which would not qualify as educational expenses.
This hypothetical graph is intended to compare a taxable investment account and a 529 tax-deferred account under the following assumptions: A) one lump sum contribution of $65,000 of after-tax amounts is invested and all earnings, gained at annual average rate of 6.5%, compounded annually, are continually reinvested and B) the taxable account is subject to an annual income tax on earnings at an aggregate rate of 30% (which may be both federal and state). No assumptions are made as to the disposition of the accounts following the 10th year.
Source: savingforcollege.com

Note: Before investing, you should consider whether your state of residency, or your intended beneficiary’s state of residency, offers a state tax deduction or any other benefits that are only available for investments in that state’s 529 savings program.

*Sources: “A Complete Guide to 529 Plans,” Joseph F. Hurley, CPA, 2009, The Wall Street Journal, September 14, 2008.

**Earnings withdrawn by AL residents from a non-AL plan are subject to AL income tax.

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Before investing, you should consider whether your state of residency, or your intended beneficiary's state of residency, offers a state tax deduction or any other benefits that are only available for investments in that state's 529 savings program.

An investor should consider the investment objectives, risks and charges and expenses of the MI 529 Advisor Plan before investing. This and other important information is contained in the Plan Disclosure Statement, which should be read carefully before investing, and which is also available from your financial advisor.

Not FDIC Insured | May Lose Value | No Bank Guarantee

The MI 529 Advisor Plan is a Section 529 college savings plan sponsored by the State of Michigan, is managed by TIAA-CREF Tuition Financing, Inc., and administered and distributed by Allianz Global Investors Distributors LLC., 1633 Broadway, New York, NY 10019-7585, 1-866-529-8818.

NOTICE: MI 529 Advisor Plan accounts are not insured or guaranteed by any state, and neither the principal deposited nor any investment return is guaranteed by any state. Furthermore, the accounts are not insured, nor the principal or any investment return guaranteed by the federal government, the Federal Deposit Insurance Corporation (the “FDIC”) or any other federal agency.