A 529 plan is a higher education savings plan with tax-advantages sponsored by either a state or an educational institution. Every state, as well as Washington, D.C., sponsors at least one 529 plan, and they all vary in terms of what they offer and how they work.
For the Washington, D.C., 529 plan, called the DC College Savings Plan, there are key facts to know before setting one up.
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1. The minimum monthly payment is $25 in order to hold an account. Furthermore, there is a $15 annual maintenance fee for D.C. residents, and a $30 maintenance fee for non-residents who hold a plan, according to the plan's website.
2. Three different options for investment are offered under the DC plan. The first investment option bases diversification on age. According to DC College Savings Plan, the portfolios become more stable over time, meaning “a smaller portion of the portfolio is invested in stock funds that tend to be more volatile.”
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An account holder has the option to change from an age-based portfolio to a single fund investment twice a year. Single fund investments can also be combined with an age-based option and allow for the investor to choose more of the type of investment that they would like to make.
The third and most conservative option is the “Stability of Principle Portfolio.” This ensures a guarantee of principal and a minimum interest rate of three percent, the website said.
3. The office of the
Chief Financial Officer said that “earnings used for qualified higher education expenses will be free of federal taxes.” A resident can contribute up to $3,000 a year for District tax deductions also.
When the plan was introduced in 2002, District Treasurer and Deputy Financial Officer N. Anthony Calhoun vowed to make the new 529 plan “one of the most outstanding programs in the country,” saying that college savings is “becoming one of the most important goals in the lives of most Americans” along with retirement.
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