Tags: Retirement | 529 Plans

Facts About Virginia's 529 Plans

By    |   Wednesday, 20 May 2015 12:19 PM

It is easy to be overwhelmed at the thought of paying for college, but with a 529 college savings plan, the rising costs of higher education become more manageable. Explained by CollegeSavings.org as a "tax-advantaged investment plan designed to encourage saving for future higher education expenses of a designated beneficiary," 529 plans help families turn relatively small investments into a significant resource to help pay for college or other qualified post-secondary education.

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Many states, including Virginia, provide tax incentives for college savings plans. Funds withdrawn from a 529 plan are also exempt from federal income tax, provided that they are used for qualified educational expenses like tuition, books, supplies, and fees.

Virginia allows state income tax deductions for 529 plan contributions up to $4,000 per account per year, and excess contributions carry forward. Contributions made by taxpayers at least 70 years old are fully deductible. Contributions from a non-owner are deductible by the owner only.

Ownership of a Virginia 529 plan does not affect consideration for financial aid in Virginia. College savings plans are also protected from both the owner's and the beneficiary's creditors.

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The Commonwealth offers three direct purchase plans and one advisor-sold plan. Consumer can directly invest in Virginia529 prePAID, CollegeWealth, and Virginia529 inVEST plans, while a broker is required for enrollment in the CollegeAmerica plan.

Virginia529 prePAID is a prepaid tuition program in which the plan owner purchases tuition at today's rate that will later pay out at the future tuition rate when the beneficiary goes to college. These plans are often tied to tuition inflation rather than market performance. Contracts are purchased by semester units offered at two pricing tiers. This plan is only open to Virginia residents, while the other three plans are open to nonresidents as well.

The CollegeWealth plan features a choice of insured deposit accounts with the tax benefits of a 529 savings plan. Contribution amounts vary by financial institution.

Offering a variety of age-based, blended, equity, and fixed income options, the Virginia529 inVEST plan offers fees that are lower than the national average along with portfolios to satisfy the range of risk tolerances. This 529 plan requires a minimum initial contribution of $25 and at least $250 of total contributions in the first year to maintain the account, according to a summary on US News.com.   

The advisor-sold CollegeAmerica 529 plan provides the greatest selection of Virginia's savings plans with 40 investment options. With the exception of American Funds Money Market Fund's $1,000 initial contribution required, this plan requires a minimum initial investment of $250 per fund and subsequent contributions of at least $50 per fund. Plans sponsored by an employer have a $25 minimum contribution per fund. 

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It is easy to be overwhelmed at the thought of paying for college, but with a 529 college savings plan, the rising costs of higher education become more manageable.
529 Plans
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2015-19-20
Wednesday, 20 May 2015 12:19 PM
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