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What is a 529 plan?








It is a tax-advantaged investment plan created for American families to encourage saving for the future higher education expenses of a designated beneficiary.

10 Things You Should Know about 529 College Savings Plans

They Pay for More than Just Tuition

Withdrawals can be used for any qualified higher education expense, including tuition, mandatory fees, supplies, books, computers or other required equipment, and room and board, if the beneficiary is enrolled in school at least half-time.

You Can Change Beneficiaries

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

The Owner Controls the 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.1

Wide Range of Schools

Accredited schools include any postsecondary college, university or vocational school that is eligible to participate in student aid programs administered by the U.S. Department of Education. This includes approximately 10,307 schools in the U.S., and many outside the U.S.2

No Income Restrictions

Anyone can open a plan regardless of their 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 college investing goals.

Convenience

Many 529 plans offer features that make them 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Earnings are free from federal income tax when withdrawn for qualified higher education expenses. Many states provide additional 529 state tax benefits to residents, including state income tax-free earnings for qualified with-drawals and/or state income tax deductions for contributions.1

Estate Planning

Five years worth of gifts (up to $70,000 for an individual or $140,000 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.

 

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 529 Plan Disclosure Document for more complete information.

Investors should carefully consider college savings plan investment goals, risks, charges and expenses before investing. To obtain a disclosure document, which contains this and other information, talk to a financial advisor or call Franklin Templeton Distributors, Inc., the manager and underwriter for a 529 plan, at (877) 4NJ-BEST. You should read the disclosure document carefully before investing and consider whether your or the account beneficiary's home state offers any state tax or other benefits that are only available for investments in its qualified tuition program.

  1. Source: savingforcollege.com, February 2015.
  2. Source: ope.ed.gov/accreditation, U.S. Department of Education, June, 2013.