Tags: Retirement | 529 Plans

Facts About South Dakota's 529 Plan

By    |   Tuesday, 19 May 2015 01:43 PM

Cited in a 2011 CBS News article as America's most expensive 529 plan, South Dakota's CollegeAccess 529 program has been said to generate some relatively hefty fees when compared with the college savings plans of other states. Even more recently,Time magazine reported that Morningstar had again downgraded the South Dakota 529 plan alongside Arizona's plan.

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While the pricey fees have historically been an issue for CollegeAccess, the plan is not without benefits, including federal income tax free distributions. This favorable tax treatment, of course, depends on the money being used for higher education expenses at an accredited institution. This means that if for some reason the money gets used for a different purpose or at a school that is not approved, the earnings portion of the withdrawal would be subject to taxes plus a penalty, according to the plan's website.

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Managed and administered by Allianz Global Investors, South Dakota's 529 plan allows the investor to retain control of the funds even after the beneficiary reaches the age of 18. This is one feature that sets most 529 plans apart from other types of college saving investment accounts, which gives many parents and grandparents a sense of security knowing that the money invested will be used for its intended purpose.

CollegeAccess 529 allows investors access to multiple investment management firms, including Franklin Templeton Investments and TIAA-CREF. Investments may be reallocated once per calendar year or if the account's beneficiary is changed.

South Dakota's plan also has a rather high minimum amount required to open the account when compared to the programs offered in other states. This minimum for the initial contribution for a non-resident of the state is $1,000 and $250 for South Dakota residents. However, the plan's website does state that if the investor chooses to contribute through a regular payroll deduction, there is no initial minimum. A $50 per month deposit by this method is required and must continue until the account reaches at least $1,000, however. The minimum for additional contributions is $50.

There are some fees involved in this particular 529 plan including an account maintenance fee of up to $20 as well as a potential sales charge. South Dakota's CollegeAccess 529 does not currently allow for investors to open accounts online, although owners and advisors are permitted to view account information online. There is no limit to the number of separate 529 accounts that a beneficiary may have and transfers and rollovers are permitted from other qualifying accounts.

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Cited in a 2011 CBS News article as America's most expensive 529 plan, South Dakota's CollegeAccess 529 program has been said to generate some relatively hefty fees when compared with the college savings plans of other states.
529 Plans
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2015-43-19
Tuesday, 19 May 2015 01:43 PM
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