Investing in PA 529 Plans for College Savings
It’s not too late to start saving for your child’s college education. Pennsylvania offers two types of 529 plans that can help you prepare for the future. Treasury offers the PA 529 Guaranteed Savings Plan and the PA 529 Investment Plan to help families save for college tuition.
The PA 529 Guaranteed Savings Plan is a fixed-rate savings plan that lets you save at today’s tuition rates for tomorrow’s tuition costs. This plan is backed by a guarantee from the State Treasurer and allows you to lock in the cost of tuition today, which can help you avoid tuition inflation.
The PA 529 Investment Plan (IP) is a more flexible and potentially more profitable option. This plan allows you to choose from a number of investment options and make regular contributions in order to grow your savings. By March 2022, Pennsylvania had more than 244,000 beneficiaries of 529 plans, and 84% of them live in urban areas. Altogether, 529 plans hold over $20 billion in assets.
Morningstar Medalist plans offer investment options that should be considered when setting up a 529 plan. These plans are evaluated by Morningstar, which looks at a number of factors including fees, performance, and risk. Morningstar Medalist plans include the Vanguard 529 College Savings Plan, Pennsylvania 529 Investment Plan, Utah's Gold-rated my529, and Nevada College Kick Start.
Reported losses are primarily the result of unrealized investment losses due to market volatility. As anyone who paid attention to their 401(k) or 529 accounts knows, market losses can be a reality. Fortunately, the losses can be offset by contributions to the 529 plan.
Some states also offer tax benefits for 529 plan contributions, which can make investing for college even more attractive. However, there are restrictions and limitations on the amount you can contribute and when you can withdraw funds. Be sure to check with your state and the plan provider to make sure you understand the terms and conditions of the plan.
To set up a 529 college savings account, the account owner—say, a parent—will choose a plan and a mixture of investments, then make regular contributions to the account. The account owner will also designate a beneficiary for the account, such as a child or grandchild. In addition to the PA 529 plans, Maryland offers two types of 529 college savings accounts: a standard investment plan and a prepaid college tuition trust.
Investing in a 529 plan is an important step in preparing for the future and making sure your children or grandchildren have the opportunity to get a college education. With the right plan and investments, you can save for college tuition and help your family achieve their education goals.
