Open an Account | Direct Account | NextGen 529 (2024)

FAQs

What is the minimum amount to open a 529 account? ›

There is no minimum to open or contribute to a 529 account. With the automatic investment plan , the minimum contribution level is $15 per month or $45 per quarter. $250, or $25 if you choose automatic monthly investing.

Benefits of my529

529 plans provide important advantages. Earnings aren't subject to federal or state tax when used for qualified higher education expenses, such as: Tuition and mandatory fees. Computers, peripheral equipment, educational software, and internet access.

You can open a 529 plan for yourself or a beneficiary such as a child or other relative.

This chart shows that a monthly contribution of $100 will compound more if you start saving earlier, giving the money more time to grow. If you save $100 a month for 18 years, your ending balance could be $35,400. If you save $100 a month for 9 years, your ending balance could be about $13,900.

If you have plans to go back to school, you can open a 529 account for yourself. Yes, the account owner and beneficiary of the savings account can be the same person. Up to $10,000 from a 529 plan can also be used for student loan repayment.

If you use distributions from your 529 account to cover anything other than education costs, you will face a penalty. You will be able to withdraw your money from the account but will be responsible for income taxes on the earnings – federal, state, and county if applicable – as well as a 10% penalty fee.

This is a program that offers outstanding flexibility, attractive investments, and additional economic benefits (such as generous state tax incentives) that for some people, at least, will provide a substantial boost to their savings. There are few, if any, weaknesses noted in the program.

The account beneficiary can make tax-free withdrawals to pay for eligible education expenses. However, a 529 plan may not be the best choice if you're not sure if your child will go to college, how much money your child will need for college or if you like to be more hands-on with your investments.

As of January 1, 2024, owners of 529 plan accounts can make tax and penalty-free rollovers to Roth IRA retirement plan accounts, subject to certain limitations. This has been welcome news to many families who worried about having unused or leftover funds in a 529 plan account.

What happens to 529 when child turns 25? ›

There are no time or age limits on using a state 529 college savings plan. Money can be kept in a 529 plan indefinitely. 529 plans can be used for graduate school, not just undergraduate school, and can be passed on to one's children.

529 plans do not have specific withdrawal deadlines. A 529 plan account owner is not required to take a distribution when the beneficiary reaches a certain age or within a specified number of years after high school graduation, and funds can remain in the 529 plan account indefinitely.

With a 529 education savings account, you may make withdrawals from the beneficiary's account for higher education expenses at any time and in whatever amount you decide; however, withdrawals must be for “qualified education expenses”.

You can call your plan administrator, make a request online, or submit a withdrawal request form. The plan can send withdrawals by check to the account owner, the beneficiary, or the school. You can transfer the money to yourself or the beneficiary electronically and then make payment to the school.

Most 529 savings plans facilitate direct transfers to a new account without liquidating the plan assets and mailing you a check. Direct transfers must be completed within 60 days to avoid any tax consequences.

Note that there are no eligibility requirements or limits based on income. For many families, 529 plans will be the obvious choice for college savings. Most plans offer age-based investment options that will automatically rebalance, taking more risk as a child is young and less as they approach college age.

Ideally, you should save at least $250 per month if you anticipate your child attending an in-state college (four years, public), $450 per month for an out-of-state public four-year college, and $550 per month for a private non-profit four-year college, from birth to college enrollment.

In June 2022, the average 529 balance was $25,903. In June 2021, the average 529 balance was much higher at $30,287. The vast majority of 529 funds are in 529 college savings plans, not 529 prepaid tuition accounts.

Leave the account intact.

If your child is simply not sure about college or perhaps wants to delay applying, you can keep your 529 plan intact until the child does use it for qualified education expenses.