College Planning

Understand your options.

Learn about the different types of college savings investment accounts to find the one that fits your goals.

Plans at a Glance

Once you've decided to invest for college, the next step is to understand your choices. Review the account types below to see how they compare.

Learn more about the individual plans using the menu on the left.

How can the plans be used?

529 Plans

Can be used for qualified educational expenses at eligible 2- and 4- year colleges, graduate, vocational and technical schools, which are generally limited to accredited U.S. institutions.

CESA

Can be used for qualified educational expenses at elementary, secondary schools and higher education.

UTMA

Can be used for any purpose that benefits the child.

What happens if the money isn't used?

529 Plans

The plan can be transferred to a different beneficiary or withdrawn as a non-qualifying expense.

CESA

The money can be withdrawn as a non-qualifying expense.

UTMA

The money is not limited to educational expenses, so there are no restrictions on how the money can be used.

What are the tax benefits?

529 Plans

Contributions may qualify for state tax deduction (where applicable). Additionally, earnings grow tax deferred at the federal and state levels (as applicable).

CESA

Earnings grow tax deferred at the federal level.

UTMA

Earnings, distributions and transactions are reported to the IRS under the minor's Social Security number and are taxed at the minor's tax rate.

How will the money be taxed when taken out of the account?

529 Plans

Earnings portion of withdrawals are federally and state tax free (as applicable) for qualified education expenses.

CESA

Withdrawals are tax free if used for qualified expenses.

UTMA

Withdrawals are reported to the IRS under the minor's Social Security number and are taxed at the minor's tax rate.

How much money is needed to open an account?

529 Plans

Account minimums start as low as $25.

CESA

Contributions are capped at $2,000 a year per IRS rules. Although this does not meet our minimum, you may open your first account with $2,000 in a fund that typically has a $2,500 minimum.

UTMA

You must meet the fund minimum, typically $2,500.

How long can contributions be made to the account?

529 Plans

There are no age restrictions. Contributions may be made at any age of the beneficiary.

CESA

Contributions can only be made before the beneficiary reaches age 18.

UTMA

Investments can only be made while the beneficiary is a minor (typically age 18).

Are there any income limitations?

529 Plans

There are no income restrictions.

CESA

Contributions may be limited or restricted depending on your income level.

UTMA

There are no income restrictions.

 

Learn More About Each Plan

The earnings portion of non-qualified withdrawals is subject to federal and state income taxes and a 10% federal penalty.

The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.