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529 College Savings Plans

What can funds be used for?

You can use 529 College Savings Plan assets to pay for qualified education expenses at almost any college or post-secondary program in the United States or select foreign institutions. Qualified expenses include tuition, room and board, books, fees, supplies and equipment (such as a computer).

Are contributions tax-deductible?

No, contributions are not deductible from federal taxes. For state tax purposes, each state makes its own determination. In Massachusetts, contributions are not tax deductible.

Are my plan assets FDIC or DIF insured?

No, because your assets are invested in mutual funds, they are not protected by FDIC or DIF insurance and can decline in value. However, if you are concerned about risk, Mayflower Advisors can help you find a portfolio that will meet your needs.

Can funds be used for private elementary or high school tuition?

No, the 529 College Savings Plan is limited to undergraduate and graduate tuition and expenses only.

Can I be a beneficiary?

Yes, if you are planning on continuing your education in an undergraduate or graduate program, you can list yourself as a beneficiary.

Can I change beneficiaries?

Yes, you have the flexibility to do so at any time.

Can I change the investment options for the assets in my account?

Each time you contribute to your account, you can elect how each contribution should be allocated among the investment options. However, you may reallocate the assets in your account to one or more alternative investment option(s) only once every calendar year or whenever you change the account’s beneficiary.

Can I continue to contribute to a Coverdell Education Savings Account if I’m enrolled in a 529 College Savings Plan?

Yes, you may. In fact, you may use the money in a Coverdell Education Savings Account to pay for K-12 expenses.

Can I make automatic contributions?

Yes, you can arrange to have funds automatically deducted from a Cambridge Savings Checking or Savings account.

Can I roll over or transfer an Educational IRA, UGMA/UTMA or existing 529 College Savings Plan?

You may roll over or transfer assets from any gifting or qualified savings plan to a 529 College Savings Plan at Cambridge Savings. Rollovers/Transfers may be subject to taxes. A financial advisor from Mayflower Advisors will explain how.

Can I withdraw funds for purposes other than education?

Yes, if you need to access your money, you can withdraw funds and pay a 10% federal penalty on earnings plus any applicable taxes.

Do I have to pay gift taxes on contributions?

The IRS grants each individual an annual gift tax exclusion of $14,000 (as of 2014). In addition, 529 College Savings Plans allow you to accelerate the use of this so that you may contribute $70,000 immediately and avoid gift taxes by using up the next five years of gift tax exclusions.

How do I get started?

Stop by your nearest Branch Location or call us at (888) 418-5626. A Cambridge Savings representative will gather information about you and arrange to have a financial advisor from Mayflower Advisors contact you at your convenience.

How do I know what funds to invest in?

A financial advisor from Mayflower Advisors will take the time to review your timeframe and risk tolerance and will help you build a customized portfolio that addresses your unique situation.

How does the 529 College Savings Plan affect financial aid considerations?

Unlike gifting accounts (UGMA/UTMAs) and Coverdell Education Savings Accounts (formerly Education IRAs), 529 College Savings Plan assets are currently attributed to the account owner, not the student, thereby usually lowering the impact on financial aid. Keep in mind, however, that this could change, given ever-changing financial aid rules.

How much must I invest to start?

Depending on the plan that best suits your needs, you may be able to get started with as little as $15 and continue to invest periodically. You can also invest a lump sum if you prefer.

Is a 529 College Savings Plan the same as a pre-paid tuition plan such as the UPlan?

No, though both are state-sponsored programs and fall under Section 529 of the Internal Revenue Code, they are not the same. With a prepaid tuition plan, you prepay tuition at today’s rates for a beneficiary to attend college at a future date. This involves pre-selecting a participating school, generally a public school. With the 529 College Savings Plan, you have the flexibility to use funds at just about any college in the United States as well as some abroad. Additionally, you can build assets tax-deferred.

Is it a new plan?

No, the 529 College Savings Plan is not a new plan. However, The Economic Growth and Tax Reconciliation Act of 2001 helped make 529 College Savings Plans more attractive by allowing distributions for qualified higher education expenses to be exempt from federal taxes.

What are my investment options?

Most 529 College Savings Plans are invested in a portfolio of publicly-traded mutual funds or similar investment vehicles. Mayflower Advisors can help you determine which 529 College Savings Programs and investment options are right for you.

What are the estate tax benefits of the 529 College Savings Plan?

The Plan’s high contribution limit means a contributor can give away a substantial sum of money in a single year (couples filing jointly can make a gift of up to $140,000 per beneficiary). Gifting large sums can effectively lower the value of one’s taxable estate upon death.

What are the tax benefits of 529 College Savings Plans?

Your contributions and earnings grow tax-deferred and you don’t have to pay federal taxes when funds are withdrawn to pay for qualified expenses. Exemption on earnings from state taxes is determined by the individual state. Plus, in most cases, both your contributions and earnings are not considered part of your taxable estate.

What does tax-deferred growth mean?

When you invest in a 529 College Savings Plan, your earnings will not be assessed federal or state taxes, allowing your assets to accumulate without paying taxes on capital gains, dividends or interest.

What does the 529 College Savings Plan offer that other college savings options don’t?

In general, the 529 College Savings Plan offers tax-deferred growth, tax-free qualified distributions, higher contribution limits, no income or age restrictions, and greater control for the account owner.

What if the beneficiary does not attend college?

You have three options:

  1. Leave the money in the account in case the beneficiary changes their mind;
  2. Change the beneficiary; or
  3. Make a non-qualified withdrawal (which would be subject to a 10% federal penalty on earnings plus any applicable taxes).

What is a 529 College Savings Plan?

Named after Section 529 of the Internal Revenue Code, this state-sponsored college savings program allows individuals to accumulate tax-advantaged funds for financing college expenses for a beneficiary.

What is the maximum amount I can contribute?

Maximum contributions vary by plan (a financial advisor from Mayflower Advisors can help you identify the differences). You may invest as little as $15 per month for some plans, or, depending upon the program you select, you may invest a lump sum and contribute periodically until your total assets in one account equal $305,000. In doing so, you may utilize as much as $70,000 in any five-year period without exceeding your federal gift tax exclusion.

Who can set up a 529 plan?

Anyone can establish a 529 College Savings Plan. You can even establish a plan for yourself. There are no age or income restrictions.

Who is Mayflower Advisors, LLC?

To give you access to 529 Plans, Cambridge Savings has partnered with Mayflower Advisors, LLC1. Mayflower Advisors, LLC is a full-service independent financial consulting firm located in Boston. Mayflower Advisors is dedicated to helping clients build and protect wealth. Mayflower Advisors, LLC offers a wide range of financial products and services to individuals and business owners.

1 Mayflower Advisors, LLC is a separate entity from Wells Fargo Advisors Financial Network, LLC (WFAFN). Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC, Member SIPC.

Who maintains control of the account – the student or me?

Unlike with other college savings plans, a 529 College Savings Plan allows you, not the beneficiary, to maintain control of the plan.