A Smart Way to Invest for College

A Smart Way to Invest for College

Like many hard-working Utahns, Utah Highway Patrol troopers know it can be difficult to set aside money for their children’s or grandchildren’s future higher education expenses while also meeting their families’ many day-today expenses.

Yet the need to plan for higher education has never been greater. By 2018, 66 percent of all Utah jobs will require education beyond a high school degree, whether it be college or technical school, according to a Georgetown University study. Students with high school diplomas or who do not graduate will be able to obtain only one-third of the estimated 1.7 million jobs. Today, just 43 percent of Utahns have post-secondary degrees or certificates, according to the U.S. Census Bureau.

The Governor’s Education Excellence Commission hopes to close that gap in the next five years. Why? After paying for college, the average graduate with a bachelor’s degree will earn $830,000 more by retirement age than the average high school graduate, according to the Federal Reserve Bank of San Francisco.

A Smart Way to Invest for College2Fortunately, there is a smart way for Utah troopers and their families to invest for college or technical school without emptying their pockets.

In 1996, the Utah Legislature established the Utah Educational Savings Plan (UESP), Utah’s official, nonprofit college savings plan. UESP aims to make it simple to invest for future qualified higher education costs by means of tax-advantaged accounts and low fees. UESP is a 529 plan, authorized under Section 529 of the Internal Revenue Code. In 2014, UESP was one of just four 529 plans nationwide to receive a Gold Analyst Rating from Morningstar, Inc., an independent investment research company. Morningstar Analyst Kathryn Spica, CFA, praised UESP for its low costs and appealing investment options. UESP has received Morningstar’s Gold Analyst Rating for four consecutive years.

“Saving money for college or technical school is a great idea for our troopers and their families. Higher education can be one of the best investments a family can make in a child’s future,” said Alan Hall, chairman of Prosperity 2020, a partnership between Utah education and business leaders to promote the value of education.

“Earnings rise as educational attainment increases, and the impacts over a lifetime add up to a significant amount. Beyond the financial return, education impacts individual quality of life and is the key to a more prosperous Utah,” Hall said. As a 529 plan, UESP provides tax incentives to parents, grandparents, relatives, and friends who open college savings accounts for the purpose of paying a beneficiary’s qualified higher education expenses at an eligible educational institution. No minimum contributions or balances are needed to start or keep a UESP account, and UESP offers multiple ways to contribute, including one-time and recurring electronic contribution and payroll contribution.

Through its Fast Forward Matching Program, UESP offers annual matching grants of up to $400 per beneficiary to households with incomes below 200 percent of the federal poverty guidelines.

UESP also offers a Gift Program account owners can enroll in by going to Account Access online at uesp.org and selecting Gift Program. A link to a personal gift page and a unique gift code appear on the screen as soon as an account has been activated for gift giving. An account owner then may share this unique link with family and friends by email or on Facebook or Twitter.

To give a gift, family and friends click on the link to the personal gift page that includes the unique gift code. They may contribute to the account online, or they may mail a check along with a gift contribution coupon they print from the page that includes the code. Use of the unique gift code ensures proper and streamlined deposit of gift contributions.

“Parents want their children to have every opportunity to succeed and to live happy and healthy lives,” said Utah Gov. Gary Herbert. “All the data shows the best way to help them fulfill their potential is to invest in their educational success. Putting money aside in an educational savings plan like UESP is a great way to start today to save for their future.”

Contributions to a UESP account grow tax-deferred, and withdrawals are exempt from federal and Utah state income taxes as long as the money is used to pay a beneficiary’s qualified higher education expenses, including tuition and fees; required books, supplies, and equipment; and certain room-and-board costs.

Utah taxpayer account owners filing individual returns or trusts also may claim a 5 percent state income tax credit in 2015 on contributions up to $1,900 (a maximum tax credit of $95) per qualified beneficiary. Married taxpayers filing jointly are entitled to a credit for contributions up to $3,800 ($190) per qualified beneficiary. The credit is available each year an account owner contributes to an account as long as the account beneficiary was age 19 or younger when named the beneficiary on the account.

“Utah’s standing in an increasingly competitive global economy will be strengthened if the state has a well-educated workforce, said Lynne Ward, UESP executive director. “There is no better time to establish an account with UESP.”

ScreenShot356Investing even a few dollars regularly can have a considerable effect on long-term savings. An account owner who invests just $20 each month for 18 years will amass $6,984 in principal and interest, according to a UESP estimate, which assumes no starting balance and contributions that earn a 5 percent rate of return, compounded monthly. A $50 monthly contribution will yield $17,460 in tax-advantaged savings, another UESP estimate shows.

UESP’s administrative fees are among the lowest of all 529 plans in the United States, and many services are free. UESP does not charge fees to open an account, change a beneficiary, alter investment options, or make withdrawals. The plan also is direct-sold, which means an account can be opened without the help of a financial advisor or broker.

Getting started is simple. Read the UESP Program Description online at uesp.org, and enroll by clicking on Open an Account. You also may call 801-321-7188 (toll-free 800-418-2551 outside Salt Lake County) Monday through Friday from 8:00 a.m. to 5:00 p.m. Mountain Time, or email info@uesp.org.

Important Legal Notice

Read the UESP Program Description for more information and consider all investment objectives, risks, charges, and expenses before investing. Call 800.418.2551 for a copy of the Program Description or visit uesp.org.

Investments in UESP are not guaranteed by UESP, the Utah State Board of Regents, the Utah Higher Education Assistance Authority (UHEAA) or any other state or federal agency. However,

Federal Deposit Insurance Corporation (FDIC) insurance is provided for the FDIC insured accounts. Please read the Program Description to learn about the FDIC-insured accounts. Your investment could lose value.

Non-Utah taxpayers and residents: You should determine whether the state in which you or your beneficiary pays taxes or lives offers a 529 plan that provides state tax or other benefits not otherwise available to you by investing in UESP. You should consider such state tax treatment and benefits, if any, before investing in UESP.