Georgia sponsors one direct-sold 529 college savings plan for parents looking to invest in their child’s future education. Though the state may not sponsor as many 529 plans as others around the country, its Path2College 529 plan has some strong attributes. The plan allows you to invest with as little as a $15 initial deposit, and its fees are among the lowest in the nation. Any U.S. citizen can open an account, but Georgia families can deduct up to $4,000 from their state taxable income per account each year. That said, the Path2College plan's maximum contribution stands at $235,000, which is not that impressive compared to most states' plans. You can open an account online in a few minutes and invest in professionally-managed portfolios designed for all types of savers. Those new to investing may be interested in the age-based portfolios, which automatically change their asset allocation or investment mix to become less risky as your child gets closer to the college years. And though Georgia doesn’t offer an advisor-sold program, you can always use our financial advisor matching tool to get paired with an expert who can help you with your 529 plan needs.
How Do I Enroll in Georgia's 529 Plan?
The simplest way to enroll in the Path2College 529 plan is online. The process should take just a few minutes if you’ve gathered the following information about yourself and your beneficiary.
- Social Security numbers or tax identification numbers
- Bank account and routing numbers if making initial contribution electronically
In addition, you can also download an application online and mail it in. Either way, you’d need to select an investment option or options at the time of enrollment.
How Much Does the Georgia Path2College 529 Plan Cost?
With the exception of the Guaranteed Investment Option, each portfolio in the Georgia Path2College 529 Plan charges a total annual asset-based fee. This fee combines the plan management fee and plan administration fee, as well as underlying fund expenses specific to the portfolio you choose. This fee isn’t charged out of your pocket, but is taken out of assets in the entire investment portfolio. So your account and everyone who invests in the same portfolio as you bears a pro-rata share.
Nonetheless, the total annual-asset based fees for the plan’s portfolios currently range from just 0.19% to 0.33%, which makes the Peach State plan one of the lightest on fees.
Tax Benefits of Georgia’s 529 Plan
In addition, Georgia taxpayers who invest in the Path2College 529 Plan can deduct up to $4,000 from their state taxable income per account each year if married filing jointly. Single filers can deduct up to $2,000. But the plan is open to any U.S. citizen or resident alien with a valid Social Security number or tax identification number.
When account holders invest in the Georgia Path2College 529 Plan, their money will grow tax-deferred regardless of residency. This means that whatever it earns in the market won’t be subject to federal and state income tax while it’s invested in the plan. So you can maximize the power of compound interest. The money you take out of the plan will also be tax free as long as you use it for 529 plan qualified expenses such as tuition and books required for enrollment.
Despite the several tax advantages offered by 529 college savings plans, you may run into some trouble if you take money out of the plan for something other than a qualified higher education expense. This is known as a nonqualified withdrawal. The earnings portion of the withdrawal may be subject to federal income tax and a 10% penalty. You may also have to pay back some or all of previously claimed deductions. You should seek a qualified financial advisor and tax professional to discuss the tax implications of a nonqualified withdrawal based on your individual circumstances. Your advisor can also help you find specific 529 plan tax benefits that may appeal to you. For example, these types of plans offer several ways you can give large amounts of money to students while avoiding gift tax.
What Are My Investment Options?
The Georgia 529 Path2College Plan allows you to focus on saving for your child’s education by investing in various portfolios designed for all risk levels. You have the choice of age-based, single-fund and multi-fund portfolios as well as a guaranteed investment option.
With age-based portfolios, you can choose one named after your beneficiary’s age. In general, age-based portfolios aim to become less risky as your child gets older. When your child is young, the age-based portfolio would aim for strong growth by investing heavily in stock funds, which are generally more risky but have greater potential for growth. As your child ages, the portfolio shifts focus to generally safer investments like bond funds in order to protect your earnings when your savings matter the most.
The Path2College Plan, however, also offers an Aggressive Managed age-based option. This portfolio generally follows the same trajectory mentioned above, but it would still invest a decent amount of your money in stock funds throughout the life of the investment. So it may suit you if you have a high risk tolerance, but still want to leave asset-allocation decisions to the professionals.
But if you have a good sense of what you want your investment mix to look like, you can invest in a multi-fund portfolio based on a specific risk level. The asset allocation for these options remains static throughout the duration of your investment. In addition, underlying mutual funds in this portfolio can be either active or passively managed.
Passive funds track a particular benchmark index composed of specific securities like stocks, while active funds are managed by a person or team using its own research and knowledge to make investment-picking decisions.
The plan also offers single-fund options. You can open an account with either one or more. However, the plan’s Single-Fund portfolios currently only invest in stocks and a money market account, which means someone with an intermediate risk level may not find these particularly appealing.
But if you’ve been saving for a long time and your child is close to college, you may be attracted to the plan’s guaranteed investment option. This portfolio provides a minimum guaranteed rate of return which spans from 1% to 3% at any time.
But remember that portfolio options are subject to change, and you should periodically check your investments. Federal law allows you to change investment options twice per year. This may be a good idea if your financial situation or savings goals change. Choosing a financial advisor can help you update your long-term investment plan accordingly.
How Do I Withdraw Money from Georgia’s 529 College Savings Plan?
By logging on to your account online, you can request a withdrawal from your 529 plan to be deposited into your bank account. Just make sure you’ve had your banking information on file for at least 30 days and that your address has not changed within the last 30 days.
You can also download a withdrawal form online and mail it in. You would need a paper form to make any nonqualified withdrawal. It’s always best to seek a qualified financial advisor when making these types of withdrawals or if you want professional help throughout the entire college savings process.
If you’re not sure how to seek a professional, you can try our free SmartAsset Advisor matching tool. It connects you with financial advisors in your area based on your financial goals and preferences. It's a simple process. First, you answer a series of questions about your financial situation. Then, the program narrows down a handful of advisors to three local professionals. You can read their profiles to learn more about them, interview them on the phone or in person and choose which one to work with in the future. This allows you to find a good fit while we do most of the hard work for you.