INVESTING GOALS529 plans help put education within reach

It all begins with opening a 529 account. Whether you’re a grandparent, parent, or other family member you may be able to start a 529 investment account for a child in your life (or even yourself) and start making contributions right away.

529 funds can be used for educational costs — the most common being higher education, including graduate school and many of its associated expenses. Funds from a 529 plan can also be applied to K-12 tuition, vocational school and registered apprenticeships.

The maximum total 529 contribution limits vary by state.  While 529 contributions are subject to federal gifting rules, a unique feature is the ability to “front-load” five years of tax-free gifting in a single year.  As of January 1, 2025, individuals can give up to $19,000 per beneficiary each year without gift tax consequences ($38,000 for married couples).  Account owners can front-load up to five years of contributions to a beneficiary’s 529 plan as annual exclusion gifts without incurring gift taxes (up to $95,000 for a single filer and $190,000 for a married couple).

When assets held in a 529 account grow, the assets are tax deferred until withdrawal and are not taxed upon withdrawal if they are used for qualified education expenses. However, unqualified withdrawals are subject to taxes and penalties on the investment gains. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor's own situation.

Yes, a 529 plan is considered an asset for the purposes of calculating financial aid. However, a family's annual income — including the student's — counts for significantly more in the Expected Family Contribution (EFC) financial aid formula than savings and investments, especially if held in the parents' names.

Additionally, college costs continue to rise while financial aid has been relatively flat leaving families to cover more of the expenses.  Starting and building a 529 investment plan with the benefit of compounding over time can help put you in control of education expenses.

529 plans may charge a program management fee and/or a state administration fee, in addition to the expense ratios of the underlying mutual funds. Many plans charge an annual account maintenance fee, although such plans often reduce or eliminate this fee for in-state residents, clients who make automatic contributions or for accounts above a minimum balance. Certain 529 plans waive the front-end sales charge/load fee (no upfront fee) on Class A shares to J.P. Morgan Wealth Management clients with no additional qualification criteria; 12b-1 (“trail”) fees continue to apply.