ScholarShare 529 College Savings Plan

Saving for college?

How to Avoid Four Costly Mistakes

55% of California families saving for college are making at least one of these mistakes. It could be costing them thousands of dollars when the tuition bills arrive. To make sure you’re on track, review these common misperceptions:

Download the
e‑book, Four Mistakes California Parents Should Avoid When Saving for College, for detailed findings.
1.   Paying taxes on your college savings income.

Most1 California families are paying avoidable taxes on their college savings growth—and those taxes can make a big difference.

Assets in a ScholarShare 529 account grow free of federal and state tax – and that can mean up to 25% more money for college!

AN EXAMPLE

As Much as 25% More Money for College Compared to a Taxable Account

1According to the Category Emotions Study of over 1,000 CA parents of children under 18 conducted by ScholarShare 529 in Feb 2019, among those saving for their child's college education, 72% are making at least one of these mistakes. This hypothetical example assumes an initial contribution of $5,000, monthly contributions of $50 for 18 years, and an average annual return of 7% compounded monthly for an effective rate of 7.23%. Tax calculations assume the maximum federal capital gains tax of 20% and the maximum state marginal tax rate of 13.3%. At the end of the accumulation period the taxable account would be worth $31,290. The ScholarShare 529 account would be worth 25% more than that amount or $39,049. Assumes taxes are paid in lump sum at the end of the accumulation period, and state taxes are not federally deductible. This is only an example and you should expect that your performance and personal tax situation may vary. Past performance does not guarantee future results.

2.   Choosing a savings vehicle that takes a big bite out of your financial-aid package.

Opening a bank account in your child’s name may seem like an American tradition, but those UGMA/UTMA accounts can hurt your financial-aid packages – and taking money out of your retirement account may be even worse!

Good news – ScholarShare 529 is one of the most financial-aid friendly ways to save!

ScholarShare 529 has a minimal impact on aid—no more than 5.64% of the account balance each year

UGMA/UTMA

A custodial account under UGMA/UTMA will be counted as astudent asset and can reduce the aid package by 50% of its value each year.2

IRA

Tap into your IRA and it can lower aid by as much as 20% of the amount withdrawn each year.3


2For accounts held by parents of students. 3Impacts subsequent years Note: The treatment of investments in a 529 savings plan varies by school. Assets are typically treated as the account holder’s and not the student’s. (Student assets are generally assessed at 20%, whereas parental assets are generally assessed at 5.6%.) Any investments, including those in 529 accounts, may affect the student’s eligibility to get financial aid based on need. You should check with the schools you are considering regarding the issue.

3.   Keeping your money where it’s not making enough money.

Many families choose a bank account or CD for their college savings. The cost of college may be rising faster than your money is growing.

With ScholarShare 529 every dollar you save can be worth a lot more. Consider a savings vehicle designed specifically for college savings.



4This hypothetical example is for planning purposes only. ScholarShare 529 investments are not FDIC insured, and may gain or lose value. Past performance does not guarantee future results. Your returns will differ. Consult with an investment professional to determine the right balance of risk profile for your investments. Returns are compounded continuously. Tax calculations assume that the maximum federal capital gains tax rate of 20% and the maximum CA marginal tax rate of 13%, that all taxes are paid in the 18th year, and that local taxes are in excess of federal deductible amounts. ScholarShare 529 tax status assumes use for approved higher education expenses.

4.   Selecting a 529 Plan that charges you too much.

529 Plans are built for college savings, but not all are the same.

ScholarShare 529 investment fees are less than 1/2 the national average and less than 1/3 the average for the advisor-sold plans.*

*Strategic Insight 529 College Savings Fee Analysis 2Q 2019. ScholarShare 529’s average annual asset-based fees are 0.29% for all portfolios compared to 0.62% for all 529 plans. Advisor-sold plans data includes A. Advisor Plans: A-Shares (unless only one class available) and B. Fee-Based Advisor Plans (Share Classes or Plans). Average expenses for advisor plans, all plans, direct plans and ScholarShare 529 are 0.91%, 0.62%, 0.43% and 0.29% respectively.

Choose a great college savings option with– ScholarShare 529

100% tax-free growth when used for approved higher education expenses

One of the most financial aid friendly ways to save - no more than 5.4% balance reduction on your award

Portfolios designed especially for college savings

Low cost - Expenses are 1/2 the national average for all 529 plans*

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