Study Up on the Basics
What is a 529?
A 529 plan is a tax-advantaged investment account. Its name stems from Section 529 of the IRS tax code, which provides special tax benefits — clearing a potential path for students to graduate with less debt.
Opportunity for growth
A 529 plan is an investment account, so your money has the potential to move with the markets. And the earlier you can start putting money away, the more time you have to contribute and to give the account growth opportunities.
Tax advantages
Your 529 savings are tax-free while in the account, so any potential growth is yours to use for college. When it’s time to use the money for school, withdrawals for qualified expenses have the potential to be tax-free. Your home state may offer additional tax breaks, too.
Flexibility down the road
Wherever your loved one’s education journey leads, their 529 savings can follow. Funds are eligible for use at most two- and four-year institutions, as well as many technical and trade schools.
Anyone can help save
Friends, family, and even friends who feel like family can easily contribute to the account. Nothing like the gift of an education.
NEST 529 College Savings
Nebraska’s 529 plan has gained national recognition for its investment options. In-state residents can take advantage of additional tax benefits when they invest with NEST, too.
Bright Start 529
This Illinois-based plan is Morningstar* Gold-rated and offers low-cost investment options from respected mutual fund families, including Vanguard, DFA, T. Rowe Price, and Dodge & Cox.
CollegeCounts 529
Alabama’s highly rated plan was named one of Kiplinger’s favorites thanks to its low fees. CollegeCounts 529 offers quality fund families and great flexibility.
*The Morningstar Analyst RatingTM is not a credit or risk rating. It is a subjective evaluation performed by Morningstar’s manager research group, which consists of various Morningstar, Inc. subsidiaries (“Manager Research Group”). In the United States, that subsidiary of Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission. The Manager Research Group evaluates each plan’s investment options within the context of their objectives and peer groups, with emphasis placed on the options with the most assets. Plans are evaluated based on four key pillars, including process, people, parent, and price. The Manager Research Group uses this four pillar evaluation to determine which plans they believe are likely to adhere to industry best practices and feature investment options that are likely to collectively outperform relevant peers on a risk-adjusted basis over the long term. They consider quantitative and qualitative factors in their research, and the weight of each pillar is as follows: 30% for Process, People, and Parent, and 10% for Price. The Morningstar Analyst Rating scale is Gold, Silver, Bronze, Neutral, and Negative. Plans that receive Morningstar Analyst Ratings of Gold, Silver, or Bronze for the most part follow industry best practices, offering some combination of the following attractive features: a strong set of underlying investments, a solid manager selection process, a well-researched asset-allocation approach, an appropriate set of investment options to meet investor needs, low fees, and strong oversight from the state and program manager. State income tax benefits vary widely from state to state, and some states have no state tax benefit for investing in a 529 plan. Given the variability of state tax benefits for investors based on personal considerations such as residency, income level, size and frequency of contributions, and other factors, Morningstar does not treat tax benefits as a predictor of performance, and therefore it is not included in the ratings assessment. Morningstar Analyst Ratings are continuously monitored and reevaluated annually. For more detailed information about Morningstar’s Analyst Rating for 529 College-Savings Plans, including the methodology, please go to https://www.morningstar.com/content/dam/marketing/shared/pdfs/Research/Morningstar_Analyst_Rating_Methodology_071020.pdf.
The Morningstar Analyst Rating (i) should not be used as the sole basis in evaluating a plan, (ii) involve unknown risks and uncertainties which may cause analyst expectations not to occur or to differ significantly from what they expected, and (iii) should not be considered an offer or solicitation to buy or sell a 529 college-savings plan or its underlying investment options.
©2021 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
An investor should consider the investment objectives, risks, and charges and expenses before investing. This and other important information is contained in the program disclosure statement for the plan which can be obtained at the plan web site and should be read carefully before investing. You can lose money by investing in a portfolio. Each of the portfolios involves investment risks, which are described in the program disclosure statement.
Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s 529 plan.
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