Tags: Retirement | 529 plan

Facts About Maryland's 529 Plans

By    |   Tuesday, 19 May 2015 02:47 PM

For those people who are interested in the best ways to save for a child's education, a 529 plan is one way to go. The savings plan is considered by many advisors to be one of the best decisions a family who wants to save can make, because it basically allows a family to deposit money into a savings account, watch it grow in the market, and then withdraw all of it on a tax-free basis, as long as that money is used for college.

During his State of the Union address in January 2015, President Barack Obama floated the idea of ending the tax savings on 529 plans, but after an outcry from much of the country, he backed down and tabled his proposal. Here are some facts about Maryland's 529 plans.

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1. Maryland offers one direct-sold plan, the Maryland College Investment Plan, which was established in 2001 and is managed by T. Rowe Price using that firm's mutual funds. As Savingforcollege.com explains, the state also offers a prepaid tuition plan which allows the investor to lock in the current tuition prices to be used in the future when that person's child matriculates to college. Both plans can be used for any college in the country.

2. Just like in 33 other states and the District of Columbia, contributions to the Maryland 529 plan are tax deductible. The contributor must be a Maryland taxpayer, and the state allows a maximum deduction of $2,500 for single and joint tax returns, according to U.S. News & World Report.

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3. In 2014, Maryland was one of four states to receive the gold medal for college-saving plans by Morningstar, which provides independent research for investments. As Morningstar explains, the "529 plans receiving a Gold Analyst Rating incorporate the industry's best practices and contain investment choices that are highly regarded by Morningstar analysts. Overall, these plans stand out as best of breed for their ability to help college savers meet their goals." It was the fifth-straight year Maryland received such a high rating from Morningstar.

4. The 529 plan costs residents a $10 annual fee, as of 2015, but those who have saved more than $25,000 in the plan or who have enrolled in automatic contributions are exempt. In December 2014, T. Rowe Price lowered its fee for managing all but one of its portfolios from 0.2 percent per year to 0.13 percent per year with the other portfolio moving to 0.11 percent per year, according to The Baltimore Sun. The maximum total that can be saved in any plan is $350,000.

5. The number of Maryland families participating in 529 plans dropped 45 percent from 2003 to 2011, The Washington Examiner reported. In recent years, the state's 529 plans "have steadily grown in participation and assets," according to The Baltimore Sun.

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For those people who are interested in the best ways to save for a child's education, a 529 plan is one way to go.
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