Georgia sponsors one direct-sold 529 college savings plan. Managed by a subsidiary of TIAA-CREF, the pension and retirement savings plan giant, the Georgia 529 plan features a low $25 initial deposit and fees that are among the lowest in the nation. Any U.S. citizen or taxpayer can open an account, while married Georgian couples filing jointly can deduct up to $8,000 worth of contributions per child on their state income tax return each year, starting in 2020 (single files can deduct $4,000 per child). That said, the Path2College plan's maximum account level stands at a comparatively low $235,000 (after your account reaches this level, you cannot make any more contributions). Opening an account online takes minutes. Those new to investing may be interested in the age-based portfolios, which gradually shift their asset allocations to be less risky as your child gets closer to college. For help determining if this plan or an advisor-sold program is right for you, 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
Or you can 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 includes the plan management fee, plan administration fee and underlying fund expenses specific to the investments 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 bears a pro-rata share.
Currently, total annual-asset based fees for the plan’s portfolios range from just 0.18% to 0.35%, which makes the Peach State plan one of the lightest on fees.
Tax Benefits of Georgia’s 529 Plan
Starting with tax year 2020, married Georgia taxpayers who file jointly and invest in the Path2College 529 Plan can deduct up to $8,000 from their state taxable income per account each year. Single filers can deduct up to $4,000 per child. But the plan is open to any U.S. citizen or taxpayer.
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.
The Trump Tax Plan allows you to withdraw up to $10,000 tax free each year to pay tuition at K-12 private, public and religious schools. Additionally, the SECURE Act expanded qualified higher education expenses to include the costs of apprenticeship programs. You can also use up to $10,000 of 529 money to cover student loan expenses tax free per account (or beneficiary).
If you take money out of the plan for something other than a qualified higher education expense, you may run into some trouble. 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 the 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.
With college costs rising faster than salaries, you're hardly alone if you're worried about saving enough for your child's education. For help with maximizing your savings' growth, consider hiring a financial advisor. SmartAsset's matching tool will connect 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 recommends three local professionals based on what you told us.
Check Out Other 529 Plans
You do not have to live in Georgia to invest in its 529 plan. Take a look at these other states' 529 plans.
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