College savings 529 plans

A 529 College Savings Plan, sometimes just called a 529 plan, is a state-sponsored investment plan that enables people to save money for a beneficiary to use toward higher educational expenses. Funds can be withdrawn tax-free when used for nearly any type of college expense, and may come with additional state or federal tax benefits.

529 College savings plan benefits

BlackRock offers two 529 plans, BlackRock CollegeAdvantage and iShares, both of which are available to qualifying investors in all 50 states. The money invested in 529 College Savings Plans may be withdrawn without incurring penalties or taxes when used for a variety of qualifying education-related expenses. Contributions to 529 plans may be as low as $25 per investment option.

How can BlackRock help?

Next to retirement, higher education is a top priority for many investors. The difficult reality is that the cost of higher education continues to escalate and saving to cover the college expenses can be daunting. With consistent investing, sound financial advice and a 529 plan, affording college education is highly achievable. BlackRock offers two solid plans for college savings.

BlackRock CollegeAdvantage 529 plan is comprised of mutual funds and ETFs from BlackRock, iShares and other leading asset managers. It also has tax advantages for multiple states, with added benefits for Ohio residents.

Service #: 866-529-8582

Here are some more features of the plan

  • Plan is based in Ohio, but available in all states.
  • Ohio residents and tax-parity state1 residents get an additional tax benefit.
  • Low minimums: $25 contribution per investment option.
  • Investors can select from active and passive strategies, target date age-based portfolios, static risk-based portfolios and single investment strategies.
  • Low $25 Annual Maintenance fee, which may be waived for Ohio residents or anyone contributing by a payroll deduction or an Automatic Investment Plan.
  • Company-sponsored plans may offer benefits such as payroll deduction.

Are you interested in the BlackRock CollegeAdvantage 529 plan?

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iShares 529 plan is comprised of iShares ETFs. It has tax advantages for multiple states, with added benefits for Arkansas residents.

Service #: 888-529-9552

Here are some more features of the plan

  • Plan is based in Arkansas, but available in all states.
  • Arkansas residents and tax-parity state residents get an additional tax benefit.
  • Flexibility to access specific sectors and asset classes through iShares ETFs.
  • Investors can select targeted asset class exposure, target year-of-enrollment portfolios, static risk-based portfolios and individual iShares portfolios.

Are you interested in the iShares 529 plan?

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More about 529 college savings plans

What are the risks associated with 529 College Savings Plans?

  • Inherent investment risks. As with any other type of investment, 529 plans carry some risk. Most 529 College Savings Plans are similar to mutual funds, and so may be negatively impacted by market losses. And while some 529 College Savings Plans offer prepaid tuition options, which enable investors to buy blocks of tuition credits, few states can actually guarantee that prepayment will fully satisfy tuition costs at the time the student attends.
  • Starting late. The earlier investment begins, the more likely the plans are to gain in value and grow (through gains and continued investment) to the size needed to cover most, if not all, educational expenses by the time the student begins undergraduate studies.
  • Taxes and penalties. Money contributed to 529 College Savings Plans provides account owners with federal and occasionally state tax benefits. If the beneficiary is ultimately unable to use the funds for qualifying educational expenses, and the account owner chooses to withdraw the money for non-qualified expenses, the account owner will incur applicable penalties or federal and state taxes. It's worth noting that 529 plans may be transferred to other beneficiaries, which usually enables the investor to avoid penalties and continue to enjoy a state and/or federal tax deferred investment.
  • High fees. The potential for high fees can diminish the benefits of investing in these plans. Choosing the right plan means minimizing costs while maximizing the benefits of participation.
  • Withdrawing funds. Investors who choose to withdraw funds from a 529 plan for other than their prescribed purposes are likely to incur penalties and will be subject to applicable state and/or federal taxes.

What are some myths surrounding 529 College Savings Plans?

Myth #1: I can only invest in my own state's 529 plan.
Truth: You are free to choose any 529 plan that represents a good fit for your financial and educational needs. While it might be beneficial to choose your state's 529 College Savings Plan in order to maximize associated tax benefits, you are not limited to that one. A total of 49 states and the District of Columbia offer 529 plans. Furthermore, beneficiaries can use 529 plan funds at any eligible educational institution that meets federal accreditation standards (i.e., can accept financial aid), including four-year colleges and universities, many two-year institutions, graduate schools, doctorate programs, vocational and technical schools in the United States as well as many schools abroad.

Myth #2: I have to be a parent to invest in a 529 college savings plan. 
Truth: Any U.S. citizen or resident alien age 18 and over with a U.S. mailing and legal address and a Social Security number, or any Trust, corporation or non-profit organization with a valid U.S. Tax ID number can invest in a 529 plan. The beneficiary of the plan can be anyone, including the investor. This makes 529 College Savings Plans an attractive choice for parents, grandparents, and students who will be paying for their own education, and others who want to set aside money for college education in a tax-deferred investment plan.

In addition, although the account owner retains sole control over 529 College Savings Plan funds, other parties can contribute to any existing plan.

Myth #3: I'll lose the money if the beneficiary doesn't go to college, or doesn't use up all the funds.
Truth: If a named beneficiary does not attend college or does not exhaust funds invested in a 529 plan, the plan can be transferred to any other qualifying “member of the family." Additionally, while it's not optimal, an account owner retains control of and can withdraw money from their 529 plan at any time, subject to applicable taxes and penalties.

Myth #4: 529 College Savings Plan funds must be distributed directly to a college or university.
Truth: 529 plan funds may be distributed directly to a college or university, but may also be distributed to the beneficiary or the account owner depending on what is most advantageous. For instance, it might be inadvisable to send funds directly to the school if it negatively impacts financial aid awards or eligibility. Assuming the funds are used appropriately (for qualifying education-related expenses), distributing funds directly to the account owner or beneficiary may be more appropriate.

Important considerations to keep in mind regarding 529 College Savings Plans

  • How much to save. 529 College Savings Plan funds can subsidize part or all of a student's college expenses. Investors can use our College Savings Estimator Calculators either on blackrock.com or ishares.com, depending on which plan is best for you, to determine how much money they need to invest relative to their financial goals.
  • Tax-deferred benefits vary. While 529 plans usually enable investors to defer federal taxes, the tax benefits provided at the state level vary state to state, and may be dependent on whether the investor chooses a 529 plan from the state where they reside.
  • Fees vary. Since fees may have the ability to negatively impact earnings, it's important for investors to carefully evaluate the fee structure of 529 College Savings Plans before deciding which plan is ideal for their financial and educational goals.