The ABCs of Education Savings Helping Create a Plan that ...ef2a852e-0c8f-43f6... · Prepaid 529...

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The ABCs of Education SavingsHelping Create a Plan that Makes the Grade

Acquaint yourself with the education savings landscape 4Build a plan for success 12Care for your plan and help it grow 37

Table of Contents

2

Acquaint: Understand the education savings landscape

The ABCs of EducationSavings

3

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

Vocational School

Community College:2 Years Off Campus

Public College/University:4 Years on Campus…

Public College/University:4 Years on Campus…

Private College/University:4 Years on Campus

Total Cost of Attendance

Tuition and Fees Room and Board Books and Supplies Transportation Other Expenses

Cost of attending different types of post-high school education

Education Is an Expense that Should Be Planned For

Source: “Trends in College Pricing 2019,” College Board, 2019. Vocational school data provided by rwm.org, 2020. Trade school costs vary by specific trade.

4

$37,960 $41,704

$44,824

$62,296

$74,568

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

High SchoolDiploma

VocationalSchool

Associate'sDegree

Bachelor'sDegree

Master'sDegree

Average Earnings4.10%

3.70%

2.80%

2.20% 2.10%

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%Unemployment Rate

Education Tends to Increase Future Earnings Potential

Source: Bureau of Labor Statistics, 2018. Average earnings and unemployment rates are for the year 2019.

5

Tuition Cost May Grow Faster than Your StudentProjected 4-year college costs today versus 18 years from now

Sources: “Trends in College Pricing 2019,” College Board, 2019, and Invesco, Ltd, 2019. This scenario shows calculations based on 4 years at a private college and includes tuition, room and board, and fees, and assumes an average of 4.5% increase per year. The hypothetical examples are for illustrative purposes only and do not predict or depict the performance of any specific investment. Actual results may vary.

20372019

$215,920

$476,855Tuition and fees are expected to increase at a rate of 3%–5% annually. This could mean an increase of $246,046 in tuition from the time your student is born until the time they graduate high school.

6

44% of American families say they have a plan to save for education.

Families that plan for education savings borrow significantly less than non-planners. (18% vs. 31%)

Build a PlanCareful planning may help your savings grow

Source: “How America Pays for College 2019,” SallieMae, 2019.

7

Assess Your Financial HealthCalculate your current savings, spending habits, and potential future expenses

8

1. Plan 2. Invest 3. Adjust 4. Mature 5. SpendIdentify personal goalsand associated costs

529 College Savings Plan Decide if you’d like to partner with anadvisor

Learn about markets,asset classes and their roles

Develop a strategy to spend wisely fromyour education savings

Identify anyprofessional goals

CoverdellEducation Savings Account

Identify andaddress important lifeevents

Learn about markettrends and their potential impacts

Think about spending inboth the short term andlong term

Determine how education savings fits into legacy planning

Trust Schedule regular reviews Attend educational seminars

Only spend what you need to—think about factors such as financialaid

Resources to Help You Start Planning“Do it yourself” vs. “do it with help” options

The organizations listed above are not affiliated with Invesco or its subsidiaries.

“Do It Yourself” Planning “Do It with Help” Planning

Many websites provide a lot of great resources and tips SavingForCollege NerdWallet FinAid

SallieMae Reports: How America Saves for

College How America Pays for

College

CNN College Costs website

Department of Education

Securities Exchange Commission (SEC)

Federal Student Aid

A financial advisor can help build education into your holistic financial plan.

Visit brokercheck.org to find an advisor.

The Internet Government Resources

Traditional Resources Financial Advisor

The research section of the library contains information on how to get started planning.

High school guidance counselors may provide resources on educationand vocational training.

9

Acquaint Yourself with the Education Savings LandscapePutting it all together

10

Education Costs Can Be Manageable with a PlanIdentify your education savings goals early to help lessen the burden.

Build a PlanHaving a plan can lead to increased success in reaching your education savings goal. The end result of your plan may not be to fully fund your student’s education, but remember that every dollar saved today is a dollar less to borrow and can help payfor future expenses.

Use All Available ResourcesThere are many resources—both in person and online—that can help you get started.

Build: Considerations in building a plan that fits your needs


11

54%

2%

3%

38%

3%

Families Have Several Options to Save for EducationAs shown in the data below, Americans save for college in a number of ways. By using these options (either alone or in combination), families can help plan for future education expenses.

Source: SallieMae, “How America Saves for College,” 2018. Personal savings is defined as a general savings account, piggy bank, Bitcoin, checking accounts, CD, investment account, juvenile life insurance, and U.S. savings bonds.

12

Personal Savings

529 Plan

Coverdell ESA

Trust(UGMA/UTMA)

Other

Different Options, Different Tax TreatmentsYou have options when saving for education. Some of these options may work better than others, depending on your situation.

Source: Federal Student Aid, Department of Education. https://studentaid.ed.gov/sa/fafsa/filling-out Visit IRS.gov for more information.

Coverdell Education Savings Account

UGMA/ UTMA

IRAROTH

(After-Tax)

IRATraditional (Pre-Tax)

529 Plan

13

Different Options, Different Tax Treatments529 college savings plans

Source: Federal Student Aid, Department of Education. https://studentaid.ed.gov/sa/fafsa/filling-out*Visit IRS.gov for more information. Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

Tax Implications Account Control Financial Aid Impact

Tax-free growth and tax-free withdrawals as long as they are used for qualified education expenses.*

Owner-driven account. Parental Assets:5.6% weight in FAFSA calculations.

529 College Savings

Plans

14

Different Options, Different Tax TreatmentsIndividual Retirement Accounts (IRAs)

Source: Federal Student Aid, Department of Education. https://studentaid.ed.gov/sa/fafsa/filling-out*Visit IRS.gov for more information. Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Taxand other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

IRAROTH

(After-Tax)

IRATraditional (Pre-Tax)


Tax-deductible contributions. Tax-free growth.Taxed on distributions.Penalty-free withdrawals for education expenses for you, your spouse, your child, or your grandchild.

Parental-owned account. Retirement assets are not counted in FAFSA calculations; however, distributions could spike income.

After-tax contributions. Tax-free growth.Possible tax-free withdrawals.*Penalty-free withdrawals for education expenses for you, your spouse, your child, or your grandchild.

Parental-owned account. Retirement assets are not counted in FAFSA calculations; however, distributions could spike income.

15

Different Options, Different Tax TreatmentsUniform Gift to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)

Source: Federal Student Aid, Department of Education. https://studentaid.ed.gov/sa/fafsa/filling-out *Visit IRS.gov for more information.

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Higher balances could potentially be taxunfriendly.

Yield control of account to the child atage of majority. Account may beinvested in various vehicles.

Student’s Assets:20% weight in FAFSA calculations.

UGMA/ UTMA

Accounts

Coverdell Education Savings

Accounts

Different Options, Different Tax TreatmentsCoverdell Education Savings Accounts

Source: Federal Student Aid, Department of Education. https://studentaid.ed.gov/sa/fafsa/filling-out *Visit IRS.gov for more information.

17


Tax-free growth, but $2,000 maximum annual contribution limit.

Remains a parental-owned account until the beneficiary turns 30 years old.

Parental Assets:5.6% weight in FAFSA calculations.

Coverdell Education Savings Account

$5,441

$3,902

$2,616

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

529 College Savings Plan

Investment Accounts

Savings Accounts

Saving in the Right Places Can Help Your Student SucceedParents who save in a 529 college savings plan typically save more than parents using other types of accounts

Source: “How America Saves for College,” SallieMae, 2018.

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Type

of A

ccou

nt

Amount Saved

Essentially an investment account*

Authorized by individual states.

Earnings not taxed when spent on qualified educational expenses.1

Can be used at any accredited college, including some overseas.

Traditional 529 College Savings Plans

Pay tomorrow’s tuition at today’s price

Only valid for specific issuing state or participating institution

There are no tax implications because money is not invested, “units or semesters” or “tuition certificates” are being purchased

These “units or semesters” or “tuition certificates” are bought at today’s prices and can be used to pay for education at a future day.

Prepaid 529 College Savings Plans

529 College Savings Plans: The FactsTwo types of 529 plans to fit your preferences and savings goals

*Subject to market risk.1 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

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Traditional 529 College Savings Plans: Designed for Education SavingsTraditional 529 plans have potential advantages over other savings vehicles when it comes to saving for education

Accepted at most schools nationwide

Account holder maintains controlAnyone can open an account

Tax advantagesPlans are flexible

Traditional 529 College Savings Plan Features

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Prepaid 529 College Savings Plans: Pay Tomorrow’s Tuition at Today’s PricesPrepaid 529 plans can help alleviate concerns surrounding market volatility or future tuition increases.

Lock in future rateswith a guarantee

Anyone can open an account

Tax advantagesPurchase “units” or “semesters” of tuition

Plans are flexible

Prepaid 529 College Savings Plan Features

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10,000

15,000

20,000

$25,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Tara’s Family: Tax Advantaged Account Oliver’s Family: Taxable Savings Account

Acco

unt B

alan

ce

Growth of $10,000 of savings over 18 years

Tax-Advantaged Plans, Such as 529 College Savings Plans, Have Potential BenefitsTake a look at two families—Tara’s and Oliver’s—and how the different ways they save affected how much they had by the time Tara and Oliver were ready to graduate high school.

Source: Invesco, 2020. This hypothetical illustration assumes an initial investment of $10,000 and a 5% annual rate of return. The taxable account assumes a 28% federal and 5% state tax rate. The illustration does not represent the performance of any specific account or investment and does not reflect any plan fees or sales charges that may apply. If such fees or sales charges were taken into account, returns would have been lower.

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Tax advantaged account grows $5,970 more than a taxable savings account

Tara’s balance at age 18:$24,066Oliver’s balance at age 18:

$18,096

Both Tara and Oliver’s families started with a $10,000 balance in their accounts: Tara in a tax-advantaged 529 college savings plan and Oliver in a taxable account.

529 College Savings Plans: Estate Tax Planning FeaturesBeyond education savings, 529 college savings plans can help families leave a legacy

1. The gift-tax exclusion applies, provided the 529 account owner makes no other gifts to the beneficiary during a five-year period. Contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year may be pro-rated over a five-year period without subjecting the donor(s) to federal gift tax or reducing his/her federal unified estate and gift tax credit. If an individual contributes less than the $75,000 maximum ($150,000 for married couples filing jointly), additional contributions may be made without subjecting the donor to federal gift tax, up to a pro-rated level of $15,000 ($30,000 for married couples filing jointly) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. If the account owner dies before the end of the five-year period, a pro-rated portion of contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year may be included in his or her estate for estate tax purposes. Please consult your tax and/or legal advisor for further guidance. 2. Non-qualified withdrawals from a 529 plan are subject to income tax and a possible 10% federal penalty on the earnings portion of the account.2. Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

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An individual may contribute up to $15,000 a year ($30,000 for a married couple) per beneficiarywithout triggering the federal gift tax.1

Special gift and estate tax treatment allows an individual to contribute up to $75,000 ($150,000 for a married couple) in one lump sum, per beneficiary, free of federal gift taxes (i.e., five times the annual gift tax exclusion), under a provision known as “accelerated gifting.”

For tax purposes, the Internal Revenue Service considers assets held in a 529 college savings plan as a completed gift and therefore treats them as the beneficiary’s assets and NOT the account owner’s.

529 college savings plan contributions and investment earnings may be withdrawn federal income tax free if the money is used for Qualified Higher Education Expenses (QHEE).2

The 529 college savings plan owner maintains complete control over account assets and is allowed to make beneficiary changes or even discontinue the account and take the money back.2

Contributions Accelerated Gifting Tax Planning Tax-Free Withdrawals 2 Control

Key ConsiderationsWhen considering whether to use a 529 plan in your estate plan, keep in mind the following key points:

Parents’ income is the most heavily weighted factor in determining financial aid.

Students are required to repay education loans (plus interest).

Financial Aid: What You Need to KnowFinancial aid helps fill the gap between what school costs and what students are expected to pay.

Many undergraduates receive some type of financial aid.

Grants and/or scholarships are “free money”—they do not

need to be repaid.

Aid is based on two factors: student merit and financial need.

B

AA

%

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Understanding Financial AidImportant Terminology

Source: Federal Student Aid. https://studentaid.ed.gov/sa/types

25

Reflects the cost of attending a specific school. Includes tuition, room, board, and related fees and expenses.

COACost of Attendance

Amount a family is expected to contribute to education costs eachyear. Determined by FAFSA submission, not dependent on a specific school’s COA. Cost of Attendance – EFC = Financial Need. Keep in mind: EFC does not always reflect a family’s actual ability to pay.

EFCExpected Family Contribution

Helps to determine amount of federal aid families are eligible for. Used by many public, private, community, and vocational schools to calculate financial

aid packages (the amount of aid—whether through grants, scholarships, or loans—offered by a school to a student).

FAFSAFree Application for Federal

Student Aid

Financial Aid Eligibility COACost of Attendance

EFCExpected Family Contribution= -

With FAFSA, Not All Money Is Considered EquallyIncome and assets are considered differently when determining EFC

For illustrative purposes only. The EFC calculation factors in the following financial resources that Tara’s family has: 1. 22%–47% of Tara’s parents’ income (based on a sliding income scale and after certain allowances). 2. 2.6%–5.64% of her parents’ nonretirement assets (including 529 plans, based on a sliding income scale and after certain allowances).Assets such as retirement accounts and real estate are excluded from the FAFSA formula when calculating EFC. A full list of excluded assets is available at irs.gov.

Parents Income

Parent’s Assets

x 47%

x 5.64%

FAFSA

Calculations

Keep in mind:

Money Earned $75,000

Excluding Retirement Savings $100,000

$35,250 $5,640

AssetContribution

Expected Family Contribution

Income Contribution

Student Contribution

$0

Tara and her family have saved diligently for Tara to attend culinary school.

Her family has $75,000 in income and

$100,000 in nonretirement assets.

Assuming Tara has not made any contributions, what can Tara’s family do to bridge the gap between what they are expected to pay and what they can actually pay?

Example—Tara’s Family:

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=

Maximizing Financial AidKeep these points in mind when applying for financial aid

Source: SallieMae. How America pays for college, 2016

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Always submit a FAFSA form (you may be unaware of all available aid).

The way the system works today may not be the same when your future student graduates high school.

Saving reduces your reliance on the financial aid system.

Savings and investments held by a student’s parents count far less than income in calculating EFC.

Future financial aid eligibility is notnecessarily affectedby your currentinvestment decisions.

Points to Remember

Subsidized Loans Unsubsidized Loans

The U.S. Department of Education paysinterest on subsidized loans while student

is inschool

Interest accrues on unsubsidized loans while student is inschool

Federal Student LoansConsider these points when applying for financial aid

Source: StudentAid.gov. Loan information based on dependent student status. For illustrative purposes only. This does not apply to private loans. Individual private lenders will provide their own rules on limits.

Limits: FirstYear Undergraduate

Limits: SecondYear Undergraduate

Limits: ThirdYear and Beyond

UndergraduateAggregate Loan Limit

• $5,500 total

• A maximum of $3,500 may be in subsidized loans

• $6,500 total


• $7,500 total


=• $31,000 total


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Student LoansLoans can have a large impact on a student’s financial future, so it’s important to start building a savings plan early to minimize borrowing

*This chart is for illustrative purposes only.

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Loan-Focused Strategy

Oliver’s Family: Loan-focused education funding strategy.

Assume Oliver’s education costs$100,000. Relying on loans, Oliver’s funding strategy may look like this:

Financial Aid

25%

Loans

75%

25%

75%

Saving Now Means Borrowing Less LaterStart now to help relieve the burden of debt

*This chart is for illustrative purposes only

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Loan-Focused Strategy

Tara’s Family: Savings-focused education funding strategy.

Assume Tara’s education costs$100,000 and her family saved a portion of that in a 529 college savings plan. This reduced the amount of loans she would have to take, but did not create a large reduction in the amount of financial aid received.

Financial Aid20%

529 Savings40%

Loans40%

Loan-FocusedStrategy

Financial Aid

Loans

IncreasedSavings-Focused Strategy

Potential to Maximize Financial Benefits During and After SchoolPutting money away now may help you—and your student—later

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Put money away now Money may grow if invested

The more you save/invest now,

the less your future student may have to find later

After graduation, your student may

have less debt and can start their own

savings earlier

Retirement Savings Are Not Education SavingsConsider these four points before using retirement accounts to fund education expenses:

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Retirement Savings

1

2

3

4

Retirement savings are meant to be long-term strategies.

Withdrawing funds during your prime savings years mayreduce the amount you have for your retirement.

Distributions from retirement accounts such as IRAs can actually hurt the amount of financial aid your student may be eligible for.

Borrowing from retirement accounts comes with stipulations (ie. Taxes and potential penalties) that may not make it the best option for funding college.

Saving for Both Education and Retirement Can Benefit in the Long-TermTake a look at Tara’s family’s strategy

For illustrative purposes only.Source: Invesco, 2018. This chart is for illustrative purposes only. These hypothetical illustrations do not represent the performance of any specific investment. Investment contributions are based upon an average annual contribution of $7,500, with $3,750 going into a 529 plan and $3,750 going into retirement savings vehicles for years 0–18, then $7,500 going into retirement savings vehicles for years 19–31. Growth is determined by a 5% annual rate of return. Systematic investing does not assure a profit and does not protect against loss in declining markets. Before investing, investors should evaluate their long-term financial ability to participate in such a plan.

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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

$400,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

529 College Savings Plan Retirement Savings

$0 starting balance for 529 plan

$0 starting balance for retirement accounts

Amou

nt o

f Sav

ings

Years

Balance in 529 plan when Tara turns 18: $110,771

Balance at retirement: $348,365

Education Savings Now May Lead to a More Comfortable RetirementPutting money away now may help you—and your student—later

Source: Invesco 2018. This chart is for illustrative purposes only. These hypothetical illustrations do not represent the performance of any specific investment. Retirement savings assumes $5,000 in contributions per year with a 6% rate of return. Illustration is based off of loan repayments for each student. College costs represent four years of tuition and fees with a 4.5% inflation growth in cost each year. Starting salary for both individuals after graduation is $40,000. Tara’s payments represent 30% of her annual income devoted to loan payments, and Oliver’s represents 50%.

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0

100,000

200,000

300,000

400,000

$500,000

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42

Ret

irem

ent S

avin

gs

15 years after graduation, when Oliver has started contributing,

Tara’s 401(k) balance has reached $40,801.82

At retirement, Tara had$224,609.62more in her account than Oliver

Tara’s balanceat retirement:$468,931.91

Oliver’s balanceat retirement:$244,322.29

• 529 College Savings Plan Saver, Tara

• Non-529 Plan Saver, Oliver

Years After College

Having a Plan is Better than No PlanPutting it all together

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Understand your options• There are many ways to go about saving for college.• Some plans are built for college savings and have potential benefits in the financial

aid process.123

Maximize financial aidUnderstanding how financial aid works and the detriment to not saving can focus your plan on saving a little over time.

Review the costs before withdrawing from retirement accountsThis may lessen your chance of a dignified retirement.

Care: How to care for the plan and help maintain consistent saving


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Plan Features to Help Maintain Consistent and Dedicated Savings HabitAutomatic Investment Programs (AIPs) allow for regular contributions directly to your account

For illustrative purposes only.

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September1

4 5 6 7

11 12 13 14 15

18 19 20 21 22

25 26 27 28 29

November1 2 3 4

7 8 9 10

14 15 16 17 18

21 22 23 24 25

26 27 28 29 30

October1 2 3

6 7 8 9

13 14 15 16 17

20 21 22 23 24

27 28 29 3 0 31

August1 2 3 4 5

8 9 10 11

15 16 17 18 19

22 23 24 25 26

29 30 31

July1 2 3

6 7 8 9

13 14 15 16 17

20 21 22 23 24

27 28 29 30 31

June1 2 3

6 7 8 9

13 14 15 16 17

20 21 22 23 24

27 28 29 30

March1 2 3

6 7 8 9

13 14 15 16 17

20 21 22 23 24

27 28 29 30 31

January1 2 3 4 5

8 9 10 11

15 16 17 18 19

22 23 24 25 26

29 30 31

February1 2

5 6 7 8

12 13 14 15 16

19 20 21 22 23

26 27 28

April1 2 3 4

7 8 9 10

14 15 16 17 18

21 22 23 24 25

26 27 28 2 9 3 0

May1 2 3 4 5

8 9 10 11

15 16 17 18 19

22 23 24 25 26

29 3 0

December1 2 3 4 5

8 9 10 11

15 16 17 18 19

22 23 24 25 26

29 30 31

$4,680

$21,600

$34,560

$8,476

$39,118

$62,589

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

$80,000

1 Coffeeper Week

5 Coffeesper Week

5 Coffees and 1Meal Outper Week

Consuming Investing in 529

How much they cost you… If you invested instead of consumed it…

Saving a Little Can Save a LotBe diligent about saving a little bit for education savingsConsider saving one coffee a day…or month…it adds up! Put that money directly into savings to take advantage of potential growth. Take a look at the growth potential if you invested the money in a 529 college savings plan and it grew over 18 years…

1 Coffee per Day $5 1 Meal Out per Week $15

Weekly Cost $25 Weekly Cost $15

Monthly Cost $100 Monthly Cost $60

Yearly Cost $1,200 Yearly Cost $720

Over 5 years $6,000 Over 5 years $3,600

Over 10 years $12,000 Over 10 years $7,200

After 18Years $21,600 After 18Years $12,960

Cost of a Coffee

Cost of a Meal Out

Source: SavingForCollege.com. Weekly cost is based on a 5-day business week. Sources: SavingForCollege.com. This chart is for illustrative purposes only. These hypothetical illustrations do not represent the performance of any specific investment. Estimated annual investment return of 6% each year for 18 years. Assumes $5 for a cup of coffee and $15 for dinner. Weekly cost is based on a 5-day business week.

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$5,400 $20,520

$41,040

$115,752 $102,278

$67,420

$19,088

0

20,000

40,000

60,000

80,000

100,000

$120,000

$0 $25 $100 $200

Total saved in a tax-advantaged account Total out-of-pocket costs

Education costs, with and without savings

Any Amount HelpsSaving the entire tuition amount can seem daunting, but any amount you save will help reduce future student debt

All four scenarios show out-of-pocket costs based on an estimated $100,000 of a four-year college education at a public university. These scenarios also assume the receipt of approximately $25,000 in financial aid, which will vary depending upon how much is accumulated in a tax-advantaged savings account. The loan portion of each column is calculated to include a fixed interest rate of 6.25% to be repaid over 180 months as defined by Sallie Mae (that’s like paying off a 15-year mortgage) following graduation with 54 monthly payments of $25 made during college. All savings in the tax-advantaged account depicted in this chart assume 5% monthly compounded growth from the beneficiary’s birth until age 18. The hypothetical examples are for illustrative purposes only and do not predict or depict the performance of any specific investment. Actual results may vary.

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Monthly amount contributed to a tax-advantaged account

$4,247 $8,901 $19,167

$8,494 $17,803 $38,335

$16,988 $35,606

$76,669

$42,469

$89,014

$191,674

$0

$50,000

$100,000

$150,000

$200,000

$250,000$50 Monthly Contribution $100 Monthly Contribution $200 Monthly Contribution $500 Monthly Contribution

The Power of CompoundingContributions—both large and small—may benefit from long-term compounding of growth

This chart is for illustrative purposes only. These hypothetical illustrations do not represent the performance of any specific investment. Assumes 5% growth on account balances every year over 5, 10, and 18 years. Compounded growth is defined as multiplying the account balance of any given year by 1.05 to show growth. There is no compounded growth in the first year of contributions.

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Growth over 5 years Growth over 18 yearsGrowth over 10 years

Investment Features to Help Your Savings GrowUnderstanding the different ways money can be invested

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1. Individual Investments 2. Age-Based Portfolios 3. Risk-Based Asset Allocation

A variety of fund portfolios with varying risk levels are available for you to choose and build your own portfolio.

Use your beneficiary’s age to build a portfolio that automatically adjusts to become more conservative over time as the student approaches high school graduation.

Based on your preferred risk tolerance, you have the ability to choose whether you want to take on more or less stock exposure.

Asset allocation seeks to balance your investments by creating a mix customized to yourpreferences and the level of risk you’d like to take. You pick and choose your mix to create your own, unique portfolio.

Care for Your Educational Savings Plan and Help It GrowPutting it all together

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Saving, even a little, over time may make a difference in the long run• Being able to put a little bit away over time can add up with investing benefits such as compound

growth.• Features such as automatic investing can help you budget and put a regular amount away.

Understanding your investment options can help• Understanding the ways your money can be invested may help you make more informed

decisions and may make your money go further.

Act Now! Plan Smart!• Once you have a plan in place you are comfortable with, do not delay in getting started.

The more you save now, the less you may need to borrow later.

Disclosures

Diversification does not guarantee a profit or eliminate the risk of loss.

This information is provided for general educational purposes only and is not to be considered legal or tax advice. Investors should consult with their legal or tax advisors for personalized assistance, including information regarding any specific state law requirements.

The opinions expressed are those of the author and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

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