529 plans can be a great way for families to save for college. Each state sponsors a plan with one or more providers and some states provide tax deductions for residents participating in the plan. However, there are exceptions. For instance, California does not provide a tax deduction for residents participating in it’s plan. This allows Californians to seek out the best plan from across the country without fear of losing any tax favored treatment.

529s savings plans are not restricted to individuals based on income. 529s offer tax deferred growth much like an employee’s 401k, but unlike a 401k used for retirement, any 529 withdrawal used for qualified education expenses (include tuition, books, room and board) is federal tax free.  Maximum contributions vary among states, but our provider allows up to $400,000 to be contributed to a 529 plan per beneficiary, and it is permissible for the account to grow past $400,000.

A common question we hear is “What if my child decides not to go to college?” 529 plan beneficiaries can be changed. If an older sibling decides not to go to college; the plan beneficiary can be changed to a younger child. If that is not an option, there is a 10% federal tax penalty and earnings are subject to income tax.*

Our provider of choice for 529 plans provides enrollment based portfolios, which are time sensitive portfolios targeted towards the freshman year of college for distribution of plan assets.

Andrew has two young children, and is already participating in 529 plans and looks forward to sharing his experience in selection and funding strategies.


* Participation in a 529 College Savings Plan (529 Plan) does not guarantee that contributions and investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses or that a beneficiary will be admitted to or permitted to continue to attend an institution of higher education. Contributors to the program assume all investment risk, including potential loss of principal and liability for penalties such as those levied for non-educational withdrawals.  Depending upon the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans may be available only if the customer invests in the home state’s 529 college savings plan. Consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances. You may also wish to contact your home state or any other 529 college savings plan to learn more about the features, benefits and limitations of that state’s 529 college savings plan.  For more complete information, including a description of fees, expenses and risks, see the offering statement or program description.