Education Funding 

college savings plans 

If you want to help pay for your child’s education, but you're not sure you're saving enough, or even how much you'll need, contacting Northwestern Mutual can be the first step in determining where you stand in your college savings plan goals.

Your college savings plan may include a 529 plan or a Coverdell Education Savings Account.

Compare your options:

529 Plan Coverdell Education Savings Account
Contribution limits Depends on plan specifics. Some allow up to $300,000 restricted by gift tax regulations.$2,000 per year, restricted by gift tax regulations. $2,000 per year, restricted by gift tax regulations.

Single Filer: To contribute the full $2,000, the modified adjusted gross income (MAGI) must be less than $95,000.1

Married Joint-filer: To contribute the full $2,000, the MAGI must be less than $190,000.2
Control of assets Account owner. Individual responsible for the account until the beneficiary reaches age 30. Plan assets must be fully distributed or rolled over by the beneficiary’s 30th birthday.
Change of beneficiary A new beneficiary may be named as long as he/she is a member of the family of the current beneficiary.

The beneficiary may be changed without income tax consequences if the new beneficiary is a member of the former beneficiary’s family.

If the new beneficiary is in the same or higher generational level than the former beneficiary, the beneficiary may be changed without gift tax consequences.
A new beneficiary may be named as long as he/she is a member of the family of the current beneficiary.

The beneficiary may be changed without income tax consequences if the new beneficiary is a member of the former beneficiary’s family.

If the new beneficiary is in the same or higher generational level than the former beneficiary, the beneficiary may be changed without gift tax consequences.
Qualified distribution Higher education expenses including: tuition, fees, supplies and equipment, and room and board. For 2002-2012, elementary, secondary and higher educational expenses including: tuition, fees, supplies and equipment, and room and board.
Taxation of withdrawals Federal income-tax free if used for qualified expenses. State tax may apply and would be levied at the recipient’s rate.3 Tax and penalty free if used for qualified expenses.

1Starts phasing out at $95,000, but less than $110,000.
2Starts phasing out at $190,000, but less than $220,000.
3In addition to ordinary income tax, the earnings portion of a withdrawal not used for qualified higher education expenses and not taken in the event of death, disability, or receipt of college scholarship by the beneficiary is subject to a 10% penalty. Each state enacts its own legislation for the taxation of qualified withdrawals.

Other funding vehicles may include:

529 plans, Coverdell Education Savings Accounts, Custodial Accounts, Roth IRAs and investment products are available through Northwestern Mutual Investment Services, LLC.

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