This Investment Plan Can Help You Save for Tuition
By Mary Morris
New parents are so busy with diaper changes and feeding schedules, saving for college is last on the priority list. But it’s crucial to start saving early, and a 529 savings plan is a good option. A flexible choice for families, 529s allow you to use your savings at in-state, out-of-state, public, or private schools, as well as community colleges, trade schools, graduate programs, some international schools, and for K–12 tuition, registered apprenticeship programs, and certain student loan repayments. Despite the flexibility of the plan, only 38 percent of parents are aware of it.
Get started. Most 529 savings plans offer tools to help you explore future higher education costs and plan your savings strategy. Online calculators, such as the 529 College Savings Calculator at savingforcollege.com, can tabulate how much you need to save by your child’s high school graduation date, as well as help you determine your financial aid eligibility and the cost of waiting to open a 529 account.
Keep it simple. Investing doesn’t have to be complicated. For newer investors, portfolios designed to closely match a student’s expected high school graduation date are a good place to start. For example, my company, Virginia529, offers a 2042 Portfolio within its Invest529 Target Enrollment roster. The 2042 Portfolio is the suggested portfolio for children ages 0–3. Target Enrollment Portfolios are tailored to your presumed savings time horizon, following a strategy that annually shifts from more volatile investments (like equities) toward more conservative investments (like bonds and cash) as you get closer to using the funds.
Find certainty in an uncertain market. When the markets are volatile and principal protection is top of mind, several options are available. For instance, Invest529’s portfolio is FDIC-insured up to $250,000—the legal maximum—for all eligible accounts for each account owner. The Stable Value portfolio is also available. Both portfolios may appeal to families wary of taking a risk, or to those who will need the funds in a relatively short amount of time. With a current effective rate of 4.49 percent, Invest529 offers the highest return among FDIC-insured portfolios in the industry.
Give the gift of education. Almost anyone may open a 529 account. These accounts are not subject to income limits, and anyone can contribute, which means grandparents and other loved ones can help kick-start a baby’s education savings. Giving to a 529 account can benefit everyone involved. Starting with the 2024–25 academic year, withdrawals from a grandparent’s (or other non-parent’s) 529 account will no longer be counted as student income.
Mary Morris, CEO of Virginia529, has more than three decades of financial and taxation services experience. She is an industry authority and possesses expertise in higher education access, education savings, student loan debt, disability savings, and financial literacy. National and local media outlets regularly feature Morris’s insights. Find out more about her at virginia529.com.