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Saving for education as shown by a mom holding daughter's handSaving to fund your children or grandchildren's education can be challenging, yet very rewarding. Designing an education savings plan to accumulate the right amount of assets at the right time is critical. Following the plan in a disciplined way, while adjusting it periodically to account for the rising cost of a college education, is also important.

529 College Savings Plans1

With a 529 plan, all contributions are made post-tax for federal income tax purposes. Some states also offer tax-deductible contributions for residents. The benefit to you is that your contribution will grow on a tax-deferred basis, and your distribution to pay for college can also be made tax-free.

Investors should be mindful that 529 College Savings Plans are municipal securities and may be subject to market volatility and fluctuation.

Another great benefit is that you, as the account owner, will have control over the funds. Many plans may even allow you to reclaim the funds for yourself if your needs change.

Evaluating education savings vehicles

Parents and grandparents can choose among a handful of investment programs, some of which offer tax advantages while saving for education expenses. In addition to 529 College Savings Plans, other plans are available and have been detailed in the comparison chart below. Speak with a financial professional2 from HSBC Securities (USA) Inc. by calling 866.586.4722 or schedule a consultation online for plan details.

529 College Savings Plans

Coverdell Education Savings Accounts (ESAs)

Custodial Accounts (UGMA/UTMA)

What's the core plan structure? Tax-advantaged investment account selected by parent with state-provided choices available Tax-advantaged investment account in which parents can choose to invest in mutual funds3, stocks5, bonds4 and more Irrevocable gift to a minor, managed by an adult custodian
What can the funds be used for? Qualifying college expenses Qualifying elementary, secondary, and college expenses Any purpose benefitting the minor
Who may open an account? Generally any adult, though details may vary by state Anyone whose adjusted gross income is less than $110, 000 for single filers and $220, 000 for married/joint filers Any adult
May friends and family contribute to the plan? Yes, in most cases Yes No
Maximum contributions Annually: $14, 000-(individual) / $28, 000 (joint) -or- lump sum: $70, 000 (individual) / $140, 000 (joint) in the first of a five year period Annually: $2, 000 $14, 000 a year w/o mandatory filing Form 709 & possible payment of gift taxes
Forms of acceptable funding Cash Cash, securities, real estate, art, patents, royalties, and more
Tax implications – Contributions Federal: not deductible
State: varies by state
Federal: not deductible
State: not deductible
Federal: not deductible
State: not deductible
Tax implications – Earnings Tax-free when used for qualifying expenses Taxed
Expiration age and transfer flexibility Funds may be disbursed for qualifying expenses for a beneficiary of any age. Transfers to other family members are allowed Funds must be transferred to another eligible family member or disbursed for qualifying expenses before the beneficiary turns 30, unless the beneficiary is an individual with special needs, in order to avoid penalties Custodial supervision ends when minor reaches age of majority which varies by state. No transfers – a gift is irrevocable

Investment and certain insurance products, including annuities, are offered by HSBC Securities (USA) Inc. (HSI), member NYSE/FINRA/SIPC. In California, HSI conducts insurance business as HSBC Securities Insurance Services. License #: OE67746. HSI is an affiliate of HSBC Bank USA, N.A. Whole life, universal life, term life and health insurance products are provided by unaffiliated third parties and are offered through Insurance Agents of HSBC Insurance Agency (USA) Inc., which is a wholly owned subsidiary of HSBC Bank USA, N.A. Products and services may vary by state and are not available in all states. California license #: OD36843.

Investment, Annuity and Insurance Products:
ARE NOT A BANK DEPOSIT OR OBLIGATION OF THE BANK OR ANY OF ITS AFFILIATES ARE NOT FDIC INSURED ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY ARE NOT GUARANTEED BY THE BANK OR ANY OF ITS AFFILIATES MAY LOSE VALUE


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