State 529 accounts let you invest money for educational purposes and the balance grows tax-free. Withdrawals are tax-free as well as long as they're used to pay for pre-school, high school or college. These educational savings plans are offered by your state and almost every state has one.
The two types of 529 plans
There are two types of 529 plans: a college savings plan and a prepaid plan.
The college savings plan is the most common type of 529 and it involves investing your post-tax dollars into the account.
The prepaid plan involves "pre-paying" your child's future tuition at today's rates. You can make payments in three ways: a lump sum upfront, a five-year payment plan or fixed monthly payments. However, unlike contributions in a college savings 529 plan, contributions to a prepaid plan are not invested. Instead, the state government "guarantees" that the money you contribute will be able to pay for tuition at the current rate when the beneficiary is ready to use the funds.
Prepaid plans can usually only be used to pay for public institutions but it can depend on the state.
Here are the types of 529 plans offered by each state.
529 plans by state
| State | Plan Name (Direct Sold) | Minimum Contribution | Maximum Initial Contribution |
| Alabama | CollegeCounts 529 Fund | $0 | $475,000 |
| Alaska | Alaska 529 | $25 | $550,000 |
| T. Rowe Price College Savings Plan | $250 | $550,000 | |
| Arizona | AZ529 | $0 | $590,000 |
| Arkansas | Arkansas Brighter Future Direct Plan | $25 | $500,000 |
| California | ScholarShare 529 | $0 | $529,000 |
| Colorado | CollegeInvest Direct Portfolio College Savings Plan | $25 | $500,000 |
| CollegeInvest Smart Choice College Savings Plan | $0 | $500,000 | |
| Stable Value Plus College Savings Plan | $25 | $500,000 | |
| Connecticut | Connecticut Higher Education Trust (CHET) | $0 | $550,000 |
| Delaware | DE529 Education Savings Plan | $0 | $500,000 |
| District of Columbia | DC College Savings Plan | $25 | $500,000 |
| Florida | Florida 529 Savings Plan | $0 | $500,000 |
| Georgia | Path2College 529 Plan | $25 | $235,000 |
| Hawaii | Hawaii's College Savings Program | $15 | $305,000 |
| Idaho | Idaho College Savings Program (IDEAL) | $25 | $500,000 |
| Illinois | Bright Start Direct-Sold College Savings Program | $0 | $500,000 |
| Indiana | CollegeChoice CD 529 Savings Plan | $250 | $450,000 |
| Indiana529 Direct Savings Plan | $10 | $450,000 | |
| Iowa | ISave 529 | $25 | $505,000 |
| Kansas | Learning Quest 529 Education Savings Program | $0 | $501,000 |
| Schwab 529 Education Savings Plan | $0 | $501,000 | |
| Kentucky | KY Saves 529 | $0 | $450,000 |
| Louisiana | START Saving Program | $0 | $500,000 |
| Maine | NextGen 529® Client Connect Series | $25 | $545,000 |
| NextGen 529®--Client Direct Series | $25 | $545,000 | |
| Maryland | Maryland Senator Edward J. Kasemeyer College Investment Plan | $25 | $500,000 |
| Massachusetts | U.Fund College Investing Plan | $0 | $500,000 |
| Michigan | Michigan Education Savings Program | $25 | $500,000 |
| Minnesota | Minnesota College Savings Plan | $25 | $525,000 |
| Mississippi | Mississippi Affordable College Savings (MACS) Program | $25 | $400,000 |
| Missouri | MOST--Missouri's 529 Education Plan | $0 | $550,000 |
| Montana | Achieve Montana | $25 | $396,000 |
| Nebraska | Bloomwell 529 Education Savings Plan | $0 | $550,000 |
| NEST Direct College Savings Plan | $0 | $550,000 | |
| Nevada | Future Path 529 Plan | $15 | $500,000 |
| The Vanguard 529 College Savings Plan | $500 | $500,000 | |
| Victory Capital 529 Education Savings Plan | $250 | $500,000 | |
| Wealthfront | $500 | $500,000 | |
| New Hampshire | Unique College Investing Plan | $0 | $621,411 |
| New Jersey | NJBEST 529 College Savings Plan | $25 | $305,000 |
| New Mexico | The Education Plan's College Savings Program | $0 | $500,000 |
| New York | New York's 529 College Savings Program | $0 | $520,000 |
| North Carolina | National College Savings Program | $25 | $550,000 |
| North Dakota | College SAVE (Direct) | $25 | $269,000 |
| Ohio | Ohio's CollegeAdvantage 529 Plan | $25 | $555,000 |
| Oklahoma | Oklahoma 529 | $25 | $450,000 |
| Oregon | Oregon College Savings Plan | $25 | $400,000 |
| Pennsylvania | Pennsylvania 529 Investment Plan | $0 | $511,758 |
| Rhode Island | CollegeBound Saver | $0 | $520,000 |
| South Carolina | Future Scholar 529 College Savings Plan | $0 | $575,000 |
| South Dakota | CollegeAccess 529 (Direct sold) | $250 | $350,000 |
| Tennessee | TNStars College Savings 529 Program | $25 | $500,000 |
| Texas | Texas College Savings Plan | $25 | $500,000 |
| Utah | my529 | $0 | $574,000 |
| Vermont | Vermont Higher Education Investment Plan | $25 | $550,000 |
| Virginia | Invest529 | $10 | $550,000 |
| Washington | WA529 Invest | $1 | $500,000 |
| West Virginia | SMART529 Direct College Savings Plan | $0 | $550,000 |
| SMART529 Select | $50 | $550,000 | |
| Wisconsin | Edvest | $25 | $589,650 |
| Wyoming | None | None | None |
These are the states that offer prepaid plans.
Prepaid 529 plans by state
| State | Plan (prepaid) | Minimum Contribution | Maximum Contribution |
| Florida | Florida 529 Prepaid Plan | $50 | $500,000 |
| Illinois | College Illinois! 529 Prepaid Tuition Program | $0 | $500,000 |
| Massachusetts | U.Plan | $300 | $500,000 |
| Michigan | Michigan Education Trust | $25 | $500,000 |
| Mississippi | Mississippi Prepaid Affordable College Tuition (MPACT) Program | $3,931 | $400,000 |
| Nevada | Nevada Prepaid Tuition Program | $1,000 | $500,000 |
| Pennsylvania | Pennsylvania 529 Guaranteed Savings Plan | $1 | $511,758 |
| Texas | Texas Tuition Promise Fund | $29 | $500,000 |
| Washington | Guaranteed Prepaid Tuition Plan (GET) | $25 | $500,000 |
The benefits of a 529 plan
There are many ways in which a 529 plan stands out against a traditional savings account or even a regular brokerage account.
- Your contributions may be tax-deductible. At least in some states. This means that money you contribute to a 529 account may be deducted on your taxes. Deductions can help lower your taxable income so this is one way to save a bit of money. Contributions to regular taxable brokerage accounts are not tax-deductible.
- Your money grows tax-deferred and withdrawals can be tax-free. Tax-deferred growth means you aren't paying annual capital gains taxes on your investments. And withdrawals from a 529 account are tax-free if you use them for qualified educational expenses. Otherwise, you pay a 10% penalty for using withdrawals for unqualified expenses.
- If your child doesn't use the money, another family member can. When you set up a 529 account, the child who will be using the money will become the beneficiary of the account. You can change the beneficiary to another eligible child or family member penalty-free.
Other ways to save for college
It isn't always easy to pay for your kid's college but the sooner you start saving, the better. If your state doesn't offer a 529 plan and the plans from other states don't meet your needs, consider saving in other ways.
You can open a traditional brokerage account and invest money in mutual funds, stocks and ETFs. However, states don't offer tax deductions for contributions made to taxable brokerage accounts. Fidelity and Charles Schwab are two of the more well-known institutions offering taxable brokerage accounts, among other types of investment accounts. They offer a variety of investment options as well as options for using a robo-advisor feature.
Fidelity Investments
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance for robo-advisor to start investing
Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)
Bonus
Find special offers here
Investment vehicles
Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Terms apply.
Pros
- No commission fees for stock, ETF, options trades
- No transaction fees for over 3,400 mutual funds
- Limited-time special offers
- Abundant educational tools and resources
- 24/7 customer service
- Over 100 brick-and-mortar branches across the U.S. for face-to-face support
Cons
- Fidelity Go® has a 0.35% advisory fee per year for balances of $25,000 and over
- Some of Fidelity's mutual funds require reaching specific thresholds
- Reports of platform outages during heavy trading days
Charles Schwab
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
Bonus
None
Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
Investment options
Stocks, bonds, mutual funds, CDs and ETFs
Educational resources
Extensive retirement planning tools
Terms apply.
Pros
- $0 minimum deposit for active investing
- No commission fees for stock and ETF trades and no transaction fees for over 4,000 mutual funds
- Offers extensive retirement planning tools
- Users can get on-demand advice from a professional advisor/Schwab expert
- Robo-advisor Schwab Intelligent Portfolios® available as a no-fee automated service option (with Premium version available for a fee)
- Award-winning thinkorswim® trading platforms and all their cutting-edge tools are now available at Schwab.
- 24/7 customer support access by phone or chat
- Charles Schwab offers over 300 brick-and-mortar branches across the U.S. for in-person support
Cons
- Specific transactions may require commission fee
- Robo-advisor Schwab Intelligent Portfolios Premium charges a one-time planning fee of $300, then a $30 per month advisory fee. For that price, you get unlimited 1:1 guidance from a CFP, interactive planning tools, plus a personalized roadmap for reaching your goals
Scholarships and grants are always another good way to pay for school, even though they don't require you to save or invest any money. They're still avenues for making college more affordable and reducing the burden of your child taking out student loans.
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FAQs
What is the downside of 529 accounts?
If money in the 529 account isn't used for eligible expenses, you could pay a penalty, usually in the form of an additional tax on your account's earnings.
How much can you contribute to a 529 account?
The maximum contribution amount depends on your state plan. Each plan has their own contribution limit, which is usually around $200,000 to $550,000. Once your account balance hits that number, you can no longer contribute.
Does a 529 affect taxes?
Contributions to a 529 account can be tax-deductible on the state level, though not every state may offer this deduction.
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