What is a 529 Plan?

A 529 plan is a tax-advantaged investment plan that allows almost any adult—a parent, guardian, grandparent, aunt or uncle, even a friend—to help pay for someone’s education, regardless of income level. You can even open a 529 plan for yourself.

Earnings grow federal income tax-free, and earnings are free from federal income tax when withdrawn to pay for qualified education expenses at most accredited two- and four-year colleges and universities and vocational-technical schools anywhere in the U.S., not just in New Jersey, along with many outside the U.S. Savings may even be used for certified apprenticeships. Qualified education expenses include tuition and fees, books, room and board, computers, and more.

The funds can also be used for tuition at eligible public, private, and religious K-12 schools, up to $10,000 per year per beneficiary.

Additionally, up to $10,000 may be paid toward principal or interest of a student loan for the beneficiary or a sibling.1

The money is always owned and controlled by the person who sets up the account, not the beneficiary.

Get started with your 529 now.

How to Choose the Right 529 Plan for You

Everyone has a different approach on how to save for education. NJBEST offers a variety of investment solutions to help meet your needs.

If you aren’t able to contribute a large amount of money, that’s OK! You can start with as little as $25 to open an account, and there’s no annual maintenance fee or sales charges. You can set up an Automatic Investment Plan and contribute as little as $25 a month. You can even use Spryng to crowdfund your account with the help of family and friends.

NJBEST offers different investment strategies to help meet your college savings needs. You can choose portfolios that automatically adjust. These portfolios simplify your investing decisions by investing in funds actively managed by Franklin Templeton. These age-based asset allocations move into more conservative portfolios as college nears. For those who prefer a more active role in their investment selection, you can even customize your own portfolio based on your individual preferences and risk comfort level.

Whatever investment strategy you utilize, the most important thing is to start today. Get started with your 529 plan here.

Who Can Open a 529 Plan?

You can open a 529 plan for any student of any age if you meet the following requirements:

      ●    You’re over the age of 18
      ●    You have a Social Security Number or a tax identification number
      ●    You have a permanent legal U.S. mailing address

That’s it! You don’t even need to be related to the student, and you can even open the account for yourself. Plus, there’s no income limit to worry about.

But before you get started, make sure you know the facts about 529 plans.

10 Things You Should Know About 529 Savings Plans

1.

They Pay for More than Just Tuition

Savings can be used for any qualified tuition expenses. Additionally, savings can be used at accredited colleges and certain vocational schools for qualified expenses which can include mandatory fees, supplies, books or other required equipment, and room and board, if the beneficiary is enrolled at least half-time. Savings can also be used for certain certified apprenticeship expenses. In addition, up to $10,000 may be paid toward principal or interest of a student loan for the beneficiary or a sibling.1

2.

You Can Change Beneficiaries

The beneficiary can be changed to a member of the immediate or extended family (including siblings, grandchildren, nieces, nephews, cousins and more).

3.

The Owner Controls 529 Plan Assets

The account owner—not the beneficiary—maintains control of the assets, including how and when they will be used.

4.

Flexible Contribution Amounts

Some 529 plans allow account owners to open an account with as little as $25. Most plans allow account owners to contribute $300,000 (or more) per beneficiary over the lifetime of the account.2

5.

Wide Range of Schools

529 savings can be used at most accredited two- and four-year colleges and universities and vocational schools, including many outside the U.S., as well as certified apprenticeships. Additionally, up to $10,000 per year per beneficiary can be used for tuition for eligible public, private and religious primary and secondary educational institutions (K-12). At this time, it is not clear what, if any, expenses will be regarded as “tuition” in the case of public schools.1

6.

No Income Restrictions

Anyone can open a plan regardless of his or her income.

7.

Multiple Investment Options

Most 529 plans offer a wide range of investment choices allowing you to invest your assets in the portfolio(s) that best suit your education savings goals.

8.

Convenience

Many 529 plans offer features that make it a convenient way to save for college, including monthly automatic investment plans and portfolios that automatically rebalance as the beneficiary gets closer to college.

9.

Earnings Grow Tax Free

Earnings grow federal income tax-free, and earnings are free from federal income tax when:

  • Withdrawn for qualified higher education expenses
  • Used up to $10,000 per year for tuition for eligible primary and secondary schools
  • Paid toward principal or interest of a student loan for the beneficiary or sibling – up to $10,000.1
10.

Estate Planning

Five years worth of gifts (up to $75,000 for an individual or $150,000 if a married couple) can be made at once to a 529 plan without owing federal gift tax, as long as no other gifts are made to the same beneficiary over the five years.
Learn more about Estate Planning

Don’t you feel better about 529 plans? Are you ready to open an NJBEST account?

Open an Account

NEXT STEPS

It’s never too early to start funding a child’s education. The typical out-of-pocket cost of a college education today can run into the tens of thousands of dollars—if not more. You’ll need to double or triple that figure if the child attends private or religious primary or secondary education before then, so your money needs to start working right now. 

To learn more, check out all of your investment options.

To open a 529 plan today, it’s never been easier than with NJBEST.

529 Plan Resources

  1. The Federal Tax Cuts and Jobs Act (TCJA), which was signed into law in December 2017 and became effective January 1, 2018, expanded the definition of a qualified higher education expense to include up to $10,000 (federal tax-free withdrawals) per year in tuition expenses at private, public and religious elementary and secondary schools (K -12). The state tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state and may also include taxes and penalties. Some states do not offer state tax deductions or tax credits for K -12 tuition, and other restrictions may apply.
  2. savingforcollege.com, February 2015.

Investors should carefully consider plan investment goals, risks, charges and expenses before investing. To obtain the Investor Handbook, which contains this and other information, call Franklin Distributors, LLC, the manager and underwriter for the plan, at (877) 4NJ-BEST. You should read the Investor Handbook carefully before investing and consider whether your or the beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in its qualified tuition program.

NJBEST New Jersey's 529 College Savings Plan is offered and administered by the New Jersey Higher Education Student Assistance Authority (HESAA); managed and distributed by Franklin Distributors, LLC, an affiliate of Franklin Resources, Inc., which operates as Franklin Templeton.

Investments in NJBEST are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed by the State of New Jersey, Franklin Distributors, LLC, Franklin Templeton, or its affiliates and are subject to risks, including loss of principal amount invested. Investing in the plan does not guarantee admission to any particular primary, secondary school or college, or sufficient funds for primary, secondary school or college.

Franklin Templeton, its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax professional.

© 2021. Franklin Distributors, LLC. Member FINRA/SIPC.