Saving for college can be a team effort. When you couple gifts from family and friends together with a systematic savings plan, it can make a meaningful impact over time. These hypothetical examples demonstrate the difference everyone pitching in can make.
By supplementing your systematic investments with gifts and contributions from family and friends, you could save an additional $20,000 for qualified higher education expenses.
Parents and grandparents seeking to put sizable amounts to work can make large lump-sum contributions to a 529 college savings plan. For example, in the 2019 tax year, married parents or grandparents can:
To see how a sizable lump-sum contribution can grow, let’s assume a one-time contribution of $50,000. Assuming an 8% average annual return, your beneficiary’s hypothetical account value at age 18 would be:
There is a separate contribution limit for each beneficiary; and gift-tax limits may be higher in the future.
Tax issues can be complicated. We encourage you to talk with your tax advisor or financial professional to learn more about making lump-sum contributions to 529 plans.
Please note that the examples shown in this article are for illustrative purposes only and not intended to portray actual results or represent an investment in a specific fund. Your results may differ.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.