529 plans for college education can be used for [post high school] vocational, community college, college/university, graduate and professional education. Many 529s have state tax benefits for state residents; if not, people can select any other state 529 plan. Annual contribution limit is $15K/beneficiary/individual, $30K/beneficiary/couple; 5 yrs worth of contributions can be pulled forward [IRS 709 filing required]. 529 assets are no longer counted in owner/grantor’s estate but there can be clawbacks by creditors. Parents, grandparents and others can open 529 for a beneficiary but the annual limits apply; there are complex financial aid eligibility implications.. Morningstar has new ratings for 529s that have 3 Gold [IL, MI, UT], 11 Silver, 21 Bronze, 18 Neutral and 8 Negatively rated plans. #personalfinance 11/3/20.
New changes to financial aid form FAFSA are favorable for Grandparent 529.
Previously, Parent 529 were more favorable than Grandparent 529 for FAFSA. Reason was that Parent 529 counted as assets, but withdrawals from Grandparent 529 counted as beneficiary’s income (so that hurt more in financial aid eligibility). But the new FAFSA changes remove this oddity and will just use IRS-income, if any, of the beneficiary. So, some of the tricks people have considered before are no longer needed (e.g. transferring ownership from grandparent to parent as college time approaches; delaying the use of Grandparent 529 until later years, etc).
It seems that it has listed tickers UTxxx with designated low-cost funds (often institutional) under them. This device allows UT 529 to change underlying funds in future without changing tickers, and also indicate clearly the underlying fund ER + plan ER for the total ER that is low. Now if all 529s started doing this, imagine the huge numbers of special tickers.
It didn't remove VIIIX/SP500 but it is now hidden under UTVLX = VIIIX.
There seems too much of VTSTX/Total Stock Market as UTSTX = UTVTX = VSTSX (why 2 UTxxx tickers are needed?)
So, I would say that I like the simplified UT 529 design. The new tickers UTxxx are recognized by Yahoo Finance, Nasdaq, CNBC, etc BUT NOT BY M*, Stockcharts, etc. Hopefully, things will improve, and you can complain to M* about it. In the meantime, you can use the tickers of the underlying funds for tracking - you would be little bit off due to small ER differences.
5th & final article in the M* 529 series provides some historical perspectives (including 5 charts) on 529 plan growth, glide-path evolution, fees (declining) & direct-sold (more passive) vs advisor-sold (more active) plans.
Excess funds from 529s can go to Roth IRAs of the beneficiary (2024- ). Taxes and penalties won't apply to these rollovers. Several limitations apply: 529 must be 15+ years old; only the money contributed or earned 5 years prior to rollovers is eligible; normal annual contribution limits for IRAs apply; but there are no income limits or earned income requirements; lifetime maximum transfer is $35K per beneficiary.
Unclear what happens if the 529 beneficiary was recently changed.
Good M* The Long View podcast transcript on college applications, choices, funding (loans, scholarships, FAFSA/CSS), savings (529s, Roth IRAs, etc). Podcast guest is Ann Garcia, author of the book, How to Pay for College (07/2022), and blog The College Financial Lady.
Several states have incentives for opening 529s for newborns. The money is kept in a special state fund and can be claimed until the age of 10 years. There are some limitations on this money such as that the beneficiary cannot be changed, etc.
AK $250 (a promo in 2023 for any new 529 a/c; additional $100 for setting up monthly auto-contributions) CA $100 (a general savings program but the money can go into 529) CO $100 IL $50 MA $50 ME $500 (funding from state & a private foundation) NE $50 PA $100 RI $100