Investing in a 529 College Savings Plan
When it comes to saving for your child or grandchild’s college education, a 529 college Savings plan is a great option. 529 plans are tax-advantaged investment accounts that offer a wide range of investment options, allowing you to save and grow your money for college expenses.
The first step in opening a 529 plan is to decide which plan is right for you. Most states offer their own 529 plans, and each plan has its own set of rules and restrictions. Additionally, some plans offer more investment options than others, so it’s important to research the different options before you decide which plan is right for you.
Once you’ve chosen a plan, you’ll need to decide how you want to invest your money. Most plans offer simple “age-based” investment options, where the investment become more conservative as the beneficiary gets closer to college age. You’re allowed to change investment choices twice each calendar year. However, if you’re looking for more control over your investment, you may want to consider a “static” option, where you can choose your own investment within the 529 plan.
It’d be nice to have the option to invest in individual stocks, but unfortunately most 529 plans don’t allow this. The only options available through Fidelity are the Fidelity Advisor 529 plan, which allows you to invest in a managed portfolio of stocks and bonds, and the Fidelity Go 529 plan, which is a robo-advisor option.
If you’re looking for a more hands-off approach, you may want to consider a “target-date” fund, which invest in a mix of stocks, bonds, and other investment based on your child’s expected college enrollment date. Where to find target-date funds; Vanguard, Fidelity investment, and other financial institutions offer these funds.
It’s important to compare the fees and account minimums of the different plans. For example, Fidelity investment has more than 3,400 mutual funds with no account minimums and no transaction fees. Its subscription platform offers Investing and Savings accounts, as well as cash-back rewards for debit and credit card purchases. Greenlight three simple options for redeeming your cash-back rewards: direct deposit, PayPal, or a gift card.
When choosing a 529 plan, it’s also important to look at the investment options. Each plan offers a menu of investment options, such as mutual funds, exchange-traded funds (ETFs), and certificates of deposit (CDs). Some plans may also offer a “controlled risk” option, which is designed to protect your principal while still providing potential growth. Additionally, some plans have recently undergone changes, such as the switch to Fidelity investment and TIAA-CREF as program managers.
Finally, it’s important to understand the tax benefits of the 529 plan. Contributions to a 529 plan are generally tax-deductible in most states, and any earnings on the investment are tax-free when they’re used to pay for qualified educational expenses.
In conclusion, opening a 529 college Savings plan is a great way to save for your child or grandchild’s college expenses. It’s important to do your research and compare the different plans before you decide which one is right for you. With the right plan, you can save and grow your money for your child’s future.
