Happy 529 Day

Submitted by Jake Wallace
Posted 6/4/19

On the 29th day of May we celebrate National 529 day (5/29, get it?). If you’re not familiar with what 529 Plans are, here are some fast facts:

• 529 Plans are also known as Qualified …

This item is available in full to subscribers.

Please log in to continue

Log in

Happy 529 Day


On the 29th day of May we celebrate National 529 day (5/29, get it?). If you’re not familiar with what 529 Plans are, here are some fast facts:

• 529 Plans are also known as Qualified Tuition Plans

• 529 Plans have been around since 1996

• 529 Plans are a tax advantaged way to save for higher education costs

• 529 Plans have no age limit, in-state restrictions or expiration date

• Anyone can contribute to a 529 Plan (Parents, grandparents, friends etc.)

If you’ve taken a look at the cost of higher education, you’ve probably had some sticker shock. According to The College Board, for the 2018-2019 schools year the average cost of tuition, room and board, plus fees is $48,510 at a private college, and $21,370 for a public, in-state tuition . Is that for four years you ask? Sadly no, that’s just for one, single year.

That’s why it’s more important than ever to get started on saving if you plan to help your child pay for school. Very much like planning for retirement, the earlier you start, the better off you are. Nothing beats compound interest, and that requires as much time as possible.

The 529 Plan is named after Section 529 of the Internal Revenue Code, and is a tax advantaged way to save for the high costs of college. The earnings in the 529 account can be tax deferred, (meaning you won’t be taxed each year that you have the plan, deferring until the end), and withdrawals are even tax exempt from both state and federal income tax if you use the funds for qualified expenses (which include tuition, fees, room and board, school supplies, etc..). Many states (including the great state of Alabama), offer tax deductions on top of that.

Another great feature is the flexibility that 529 Plans provide. Their structure is such that the owner of the plan (typically the parent) retains control of the plan, and if the intended beneficiary decides not to go to college, or they don’t use all the money in the account, the account can be assigned to a relative of the beneficiary (such as a brother, sister, cousin, spouse, grandchild), so that they can use the funds. There are no restrictions regarding in-state or out-of-state schools. There are no age restrictions, and with contributions in the state of Alabama allowed up to $475,000, you can even plan for Grad school.

When it comes to choosing the investments inside the 529 Plan, you have a lot of options. Working with an experienced advisor who is familiar with your unique situation is a great way to maximize this powerful investment vehicle.

If college is in your young child’s future, and you’d like some professional assistance in planning for it, you can reach out to Jake Wallace at Morgan Stanley in Fairhope. Email at jake.wallace@morganstanley.com, or call at 251-990-2946.

Jake Wallace is a Financial Advisor with Morgan Stanley Wealth Management in Fairhope, AL. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.

Investors should consider many factors before deciding which 529 plan is appropriate. Some of these factors include: the Plan’s investment options and the historical investment performance of these options, the Plan’s flexibility and features, the reputation and expertise of the Plan’s investment manager, Plan contribution limits and the federal and state tax benefits associated with an investment in the Plan. Some states, for example, offer favorable tax treatment and other benefits to their residents only if they invest in the state’s own Qualified Tuition Program. Investors should determine their home state’s tax treatment of 529 plans when considering whether to choose an in-state or out-of-state plan. Investors should consult with their tax or legal advisor before investing in any 529 Plan or contact their state tax division for more information.

Investors should review a Program Disclosure Statement, which contains more information on investment options, risk factors, fees and expenses and possible tax consequences. Investors can obtain a 529 Plan Program Disclosure from their Financial Advisor and should read it carefully before investing.

Morgan Stanley and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax or legal advisor.

Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.

Morgan Stanley Smith Barney LLC. Member SIPC. CRC2535076 5/19