investor-learn-college

Learn and Plan:
Saving for College

Saving for your children's education requires a long-term plan, so the earlier you start your plan the better. The sooner you start saving, the more you can rely on savings in a tax-deferred or tax-free investment.

Tax advantaged accounts that enable you to save for college

  • 529 Savings Plan: specifically intended for college savings
  • Coverdell Education Savings Account: intended for college savings
  • UGMA/UTMA Custodial account: can be used for college expenses without penalty
  • Roth IRA: either a traditional or a Rollover IRA allows you to use savings without penalty for qualified education expenses, though these withdrawals will be taxed as income

Learn more about saving for college

 

The Value of Starting Early

Sample data to demonstrate the benefit of an early start
Average Annual Investment Return 8%
Annual Tax-Deferred Contribution $2,000 $3,500
Age of Child at First Contribution 1 7 1 7
Account Value When Child Reaches Age 18 $80,893 $40,991 $141,562 $67,956

Hypothetical example for illustration only. Does not factor in inflation. Does not reflect the return earned by any given investment option. Does not reflect commissions to purchase or sell securities. Investment returns cannot be predicted or guaranteed.

The advantage of saving for college in a tax-deferred account

Saving for college in a tax-deferred account can yield more money for your child’s college education. Assuming an 8% rate of return, a combined federal and state tax rate of 28.5% for the taxable account, an initial contribution of $1,500, and a monthly contribution of $250 each month for 17 years, the difference between saving in a tax-deferred account and a taxable account could be $22,372:

Assumptions: Tax-Deferred Saving Taxable Saving
Initial Contribution $1,500 $1,500
Monthly Contribution $250 $250
Average Annual Return 8% 8%
Federal/state Tax Rate N/A 28.5%
Account Balance After 17 Years $110,462 $88,090

Source: CDA Wiesenberger. Hypothetical example for illustration only. Assumes automatic reinvestment of dividends. Does not factor in inflation. Does not reflect commissions to purchase or sell securities. Does not reflect the return earned by any given investment option. Investment returns cannot be predicted or guaranteed.

How much will I need to save?

Our College Savings Calculator enables you to project college costs using different assumptions for variables such as investment return, education-cost inflation, amounts saved, etc.

How can I save enough?

U.S. tax law make it easy for you to lower your taxes while saving for college. College savings accounts, which allow tax-deferred or tax-free compounding of assets, can help you save the money you'll need to fund all or part of your child's education.

Can I save for college in a sustainable and responsible fund?

Of course. Many people want their investments to align with their values.  Many sustainable and responsible funds are available for college savings investment packages.  Ask your financial advisor or call Calvert for more information.  With sustainable and responsible investing, you can make investment choices that help you save for your child's education and help improve the world in which that child will live.

F205 (4/09)

Calvert mutual funds are underwritten and distributed by Calvert Investment Distributors, Inc., member, FINRA, and subsidiary of Calvert Investments, Inc. 800.368.2748

Calvert Investment Management, Inc. serves as the investment advisor and provides sustainability research for the Calvert mutual funds and institutional investment strategies.

This site intended for citizens and permanent residents of the United States of America.