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Earnings grow federal income tax-free, and earnings are free from federal income tax when withdrawn to pay for qualified education expenses at most accredited two- and four-year colleges and universities and vocational-technical schools anywhere in the U.S.,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’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
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
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).
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.
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
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
No Income Restrictions
Anyone can open a plan regardless of his or her income.
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.
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.
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
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?
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
Try Our Tools to Help with Your Education Savings Strategy
Try Our Tools to Help with Your Education Savings Strategy
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Tax benefits are conditioned on meeting certain requirements. Federal income tax, a 10% federal tax penalty, and state income tax and penalties may apply to nonqualified withdrawals of earnings. Generation-skipping tax may apply to substantial transfers to a beneficiary at least two generations below the contributor. Gift examples are general; individual financial circumstances and state laws vary—consult a tax advisor before investing. If the contributor dies within the five-year period, a prorated portion of contributions may be included in their taxable estate. See the Investor Handbook for more complete information.
- Federal tax law provides that up to $10,000 per year may be withdrawn from a 529 savings plan federal income-tax free, if used for tuition expenses at private, public or religious primary and secondary (K-12) schools. It is not clear what public K-12 school costs, if any, will be regarded as tuition for this purpose. Additionally, amounts paid as principal or interest on certain existing loans of the Beneficiary or their sibling, subject to various limits including annual limits, can constitute qualified distributions. State tax benefits and treatment of withdrawals for K-12 tuition and loans may vary by state, may not have been updated for changes in federal tax law and may be uncertain; consult a tax professional concerning your state.
- 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 Templeton Distributors, Inc., 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.
This material is not a recommendation of any particular security, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax advisor, investment professional or insurance agent. Before making any financial commitment regarding a Section 529 college savings plan, consult with the appropriate financial advisor.
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 Templeton Distributors, Inc., an affiliate of Franklin Resources, Inc., which operates as Franklin Templeton Investments. No federal or state guarantee. Principal value may be lost, and investing in the plan does not guarantee admission to any particular primary or secondary school or to college or sufficient funds for primary or secondary school or for college. Please refer to the Investor Handbook for more complete information.
See the Investor Handbook for more information on NJBEST 529 College Savings Plan, including sales charges, expenses, general risks of the Plan, general investment risks and specific risks of investing in Plan portfolios, which can include risks of convertible securities; country, sector, region or industry focus; credit; derivative securities; foreign securities, including currency exchange rates, political and economic developments, trading practices, availability of information, limited markets and heightened risk in emerging markets; growth or value style investing; income; interest rate; lower-rated and unrated securities; mortgages, asset-backed and credit-linked securities; life settlement investments; restructuring and distressed companies; securities lending; smaller and midsize companies; and stocks.
