On Course to College - J.P. Morgan Asset Management
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On Course to College

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Choose the right college savings plan

A tax-free 529 plan can grow faster than taxable accounts earning the exact same investment returns to help you accumulate more for college.1

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.

2 J.P. Morgan Asset Management. Illustration assumes an initial $1,000 investment and monthly investments of $300 for 18 years. Chart also assumes an annual investment return of 6% and a federal tax rate of 28%. Investment losses could affect the relative tax-deferred investing advantage. This hypothetical illustration is not indicative of any specific investment and does not reflect the impact of fees or expenses. Each investor should consider his or her current and anticipated investment horizon and income tax bracket when making an investment decision, as the illustration may not reflect these factors. These figures do not reflect any management fees or expenses that would be paid by a 529 plan participant. Such costs would lower performance. Shown for illustrative purposes only. Past performance is no guarantee of future results.

Start early and save regularly

Make college savings a priority by opening 529 accounts early and arranging for automatic contributions from your bank account or paycheck each month.

 
1 J.P. Morgan Asset Management. This hypothetical example illustrates the future values of $500 monthly investments for different time periods. It also assumes an annual investment return of 6%. Investment losses could affect the relative tax-deferred investing advantage. This hypothetical illustration is not indicative of any specific investment and does not reflect the impact of fees or expenses. Such costs would lower performance. Each investor should consider his or her current and anticipated investment horizon and income tax bracket when making an investment decision, as the illustration may not reflect these factors. A plan of regular investment cannot assure a profit or protect against a loss in a declining market. Shown for illustrative purposes only. Past performance is no guarantee of future results.

Know what to expect from financial aid

Expecting more financial aid than you are likely to receive can cause you to save too little and borrow too much.

1 Finaid.org. Based on full-time students at four-year public colleges.

2 Sallie Mae, How America Pays for College, 2016. Four-year public college costs.

Make the most of special gift and estate tax benefits

Only 529 plans allow five years of tax-free gifts in a single year — and all gifts and investment earnings grow outside the donor’s taxable estate.1

1 No additional gifts can be made to the same beneficiary over a five-year period. If the donor does not survive the five years, a prorated portion of the gift is returned to the taxable estate. Be sure to discuss any gift tax implications with your tax advisor.

Invest in a diversified portfolio

Even in its worst 18—year period, a 50/50 mix of stocks and bonds outperformed tuition inflation — that's the power of diversification.

1 Barclays Capital, FactSet, Robert Shiller, Strategas/Ibbotson, Federal Reserve, BLS, J.P. Morgan Asset Management. Rolling returns shown are based on calendar-year returns from 1979 to 2015. Data are as of 12/31/15. Past performance is not indicative of future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Don't use retirement funds for college

Paying for college with IRAs and 401(k)s can result in smaller retirement accounts, lower financial aid packages and higher taxes.

1 J.P. Morgan Asset Management. This illustration assumes that assets would have remained in a tax-advantaged retirement account instead of being withdrawn for college, earning 6% annual investment returns for 20 years. This example does not represent the performance of any particular investment. Different assumptions will result in outcomes different from this example. Your results may be more or less than the figures shown. Investment losses could affect the relative tax-deferred investing advantage. Each investor should consider his or her current and anticipated investment horizon and income tax bracket when making an investment decision, as the illustration may not reflect these factors. These figures do not reflect any management fees or expenses. Such costs would lower performance. Shown for illustrative purposes only. Past performance is no guarantee of future results.