Schwab Celebrates 529 Plans on 5/29 Day

Firm Reminds Investors of 529 Plans to Manage Rising College Costs

Friday, May 28, 2010 5:00 am PDT



Public Company Information:

"The Real Cost of College Education -- Annual Survey of Colleges 2009-2010"

SAN FRANCISCO--(BUSINESS WIRE)--On 5/29 Day, Charles Schwab reminds parents that the sooner they start saving and investing in a 529 plan for college savings, the more flexibility they will have in paying for their children’s education.

“To get the most out of college savings, parents must let their money work as hard as possible for them,” said Rene Kim, senior vice president of Schwab Investor Services. “Every dollar that parents save for their children now is one less dollar that will come out of their checking account when their child is in college. However, the sooner you start the easier, because parents get the power of compounding on their side.”

With college costs rising at an average rate of about 6 percent per year,¹ parents should consider the advantages of a 529 plan, Kim added. Benefits include:

  • Tax-Free Withdrawals: Investment income grows tax-free and can be withdrawn tax-free if used for qualified education expenses, such as tuition, room and board, books and supplies, computers and internet access.
  • Limited Impact on Financial Aid: Because 529 plan assets are considered the parent’s money and not the child’s, only 5.6 percent of the account’s value is considered parental assets for financial aid calculations.
  • Investment Options for Every Age: Investors can select an age-based portfolio that moves from aggressive to conservative over time. When school is more than 10 years away, a more aggressive portfolio could be appropriate; when the student is about to start college, the investments move to a more conservative asset allocation. Investors who don’t want an age-based option can select their own portfolio once per calendar year.
  • Special Gift Tax: Friends and family can each contribute a lump sum of up to $65,000 to any number of beneficiaries in a single year (a married couple can contribute $130,000) without incurring a gift tax.2

In addition to these benefits, parents maintain control of the account regardless of the age of the beneficiary, and there is no age limit to withdraw funds. Assets in a 529 plan may also be transferred to other children or eligible family members, including siblings, parents, step-siblings and in-laws.

1 According to The College Board’s report “The Real Cost of College Education -- Annual Survey of Colleges 2009-2010,” ten-year historical rate of tuition increase is approximately 6 percent.

2 To qualify for the special gift tax exclusion, you need to file a gift tax return to treat the gift as if it were made in equal payments over five years. To avoid gift tax, you should make no additional gifts to the beneficiary during those five years. For specific tax information, please consult your tax advisor. Schwab does not provide tax advice.

For More Information

For more detailed information on 529 plans and for links to interactive college savings calculators and educational content, please visit As always, be sure to check with your financial advisor for specific guidance.

Important Information

Before investing, carefully consider the plan's investment objectives, risks, charges and expenses. This information and more about the plans can be found in the Schwab 529 Guide and Participation Agreement available from Charles Schwab & Co., Inc., and should be read carefully before investing. If you are not a Kansas taxpayer, consider before investing whether your or the beneficiary's home state offers a 529 plan that provides its taxpayers with state tax and other benefits not available through this plan. As with any investment, it is possible to lose money by investing in this plan.

The Schwab 529 College Savings Plan is available through Charles Schwab & Co., Inc., and is managed by American Century Investment Management, Inc. The Plan was created by the Kansas State Legislature under the provisions of Section 529 of the Internal Revenue Code and is administered by Kansas State Treasurer Dennis McKinney. Notice: Accounts established under the Schwab 529 Plan and their earnings are neither insured nor guaranteed by the State of Kansas, the Kansas State Treasurer, American Century Investments or Charles Schwab & Co., Inc. Accounts established under the Schwab 529 Plan are domiciled at American Century Investments and not Schwab.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 300 offices and 7.9 million client brokerage accounts, 1.5 million corporate retirement plan participants, 783,000 banking accounts, and $1.5 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Named Highest in Investor Satisfaction with Self-Directed Services by J.D. Power and Associates in 2009, its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and mortgage services and products. More information is available at (0510-2863)


Charles Schwab
Matt Hurwitz, 415-667-0480
Pablo Rodriguez, 415-486-3267

Corporate Public Relations
Contacts for Journalists Only




Business Wire NewsHQ℠