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What is a "529?"

In 1996, Congress created Section 529 of the Internal Revenue Code — as a complement to prepaid tuition plans established by many states — to help investors save for college.

Like prepaid tuition plans, 529 savings plan earnings grow tax-deferred, as long as the money is kept in your account. And, now withdrawals — used for qualified higher education expenses — are free from federal income tax.

Qualified expenses include tuition and fees, room and board, books and other supplies. Speak to your tax or financial advisor.

But unlike prepaid tuition plans, there are no residency requirements. 529 savings plan monies can be used to pay for higher education costs at any accredited college, university or technical school in any state.


Compare 529 Plans to Other College Savings Strategies

OklahomaDream 529 Custodial Accounts (UGMA, UTMA) Coverdell Savings Plans Pre-Paid Tuition Plan
Control of Account Account owner retains control Child takes control of account after reaching "age of majority" Account owner retains control Account owner retains control
Taxation of Earnings Free from Federal and State taxes (in most states)1 May be subject to annual taxes Free from Federal and State taxes (in most states)1 Free from Federal and State taxes (in most states)1
Usage Guidelines Any accredited college, university or technical school in any state Assets can be used for other purposes outside of educational expenses Must use for qualified education expenses before child turns 30 Must use for pre-determined school
Income Limit None None Single filers: $95,000-110,000; joint: $190,000-220,000 None
Residency Requirements None None None Generally must be a resident of the same state as school
Maximum Balance Limit $300,000 max balance per beneficiary None Annual contribution limit: $2,000 per child N/A
Change of Beneficiary Allowed Yes, to any family member at any time2 None Yes N/A
Financial Aid Implications Treated as account owner's assets3 Treated as child's assets (35% expected to be contributed) Treated as child's assets (35% expected to be contributed) Dollar-for-dollar reduction of financial aid

 

1. Non-qualified withdrawals are subject to federal income tax and a 10% penalty on earnings, and may be subject to state tax.

2. Gift taxes may apply. Speak to your tax advisor.

3. Certain restrictions apply. See the current Plan Disclosure Statement for details.

Transferring assets from an UGMA/UTMA to the OklahomaDream 529 Plan may require the account custodian to sell non-cash assets and incur possible tax consequences including capital gains. Speak with your tax advisor.

Before investing, you should consider whether your state of residency, or your intended beneficiary's state of residency, offers a state tax deduction or any other benefits that are only available for investments in that state's 529 savings program.

An investor should consider the investment objectives, risks and charges and expenses of the OklahomaDream 529 Plan before investing. This and other important information is in the Plan Disclosure Statement, which should be read carefully before investing, and which is available from your financial advisor or on this website.

Not FDIC Insured | May Lose Value | No Bank Guarantee

The OklahomaDream 529 Plan is a Section 529 college savings plan sponsored by the State of Oklahoma, is managed by TIAA-CREF Tuition Financing, Inc., and managed and distributed by Allianz Global Distributors LLC., 1345 Avenue of the Americas, New York, NY 10105-4800, 1-877-529-9299.