Your Guide to 529 Education Savings Plans

Financing a college education is not an easy task, and many families cannot afford the full cost of higher education. A 529 Education Savings Plan can immensely reduce the future burden of student loan debts, irrespective of your family status or financial situation.

529 plans, officially known as “Qualified Tuition Plans,” are tax-advantaged investment plans that are designed to help families pay for future college and education expenses. There are two types of 529 plans: prepaid tuition plans and education savings plans. They are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. The 529 plans are administered by the 50 states and the District of Columbia.


Some Important Facts about 529 Education Savings Plans

Under the 529 Education Savings Plans, you can open an investment account for your beneficiary to meet the expenses of their future college education, including room or boarding and tuition fees. It is considered one of the smartest tax-advantaged strategies to save for your child or grandchild’s future education costs.

The money saved in this account can normally be used at any college or university, including non-U.S. colleges and universities. The education savings plans offer greater flexibility compared to prepaid tuition plans since the former offers multiple investment options. Moreover, you’re not restricted to the sponsoring state or any specific institution.

As long as the money is used for qualified education expenses, the withdrawal is not subject to either state or federal taxes.  But tax benefits do vary from state to state—you need to check the details of any 529 plan to understand the specific tax benefits the state is allowing.

If you have an Education Savings account, you can choose from a range of investment options like mutual funds and exchange-traded funds (ETF), though mutual funds are much more common. Your investment advisor can help you select from a selection of plans located around the country. However, investments in mutual funds and ETFs are not federally guaranteed.


Fees and Expenses You Need to Pay

States often charge a one-time account setup fee for a 529 plan. The minimum initial contribution requirement can be as low as $ 25 (in Florida) to $964 (in West Virginia) for the lowest-cost option.

Education savings plans may charge an enrollment or application fee, annual account maintenance fees, ongoing program management fees, and ongoing asset management fees. The asset management fees will depend on the investment option you select; therefore, you can search for low-cost mutual funds and ETFs to keep management fees low.


What Is the Contribution Limit for a 529 Plan?

There are no yearly contribution limits to a 529 plan. However, each state has a different aggregate contribution limit for each 529 account which typically ranges from $235,000 and $550,000. It doesn’t matter if you cannot afford monthly contributions; after you make your initial contribution of $25, you can invest as much as you want, whenever you want.



At CPR Investments Inc., we’re dedicated to helping you make smart decisions about saving and paying for education. From 529 education savings plans to financial aid and national grant options, we provide tailored financial advice to set you on the road to achieving your child’s educational goals. Contact us today!

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