Nebraska sponsors two direct-sold and two advisor-sold 529 College Savings Plans. All offer several tax benefits and Nebraskan families can deduct up to $10,000 from their state taxable income, which is high among plans that offer state-tax deductions. The NEST advisor and direct-sold options sponsor scholarships that your child can use along with plan savings and financial aid. Known financial firms TD Ameritrade offers a direct-sold option and State Farm offers an advisor-sold plan through its representatives. All four plans offer various investment options designed for all types of savers. However, fees span from low to high across all four plans. You can find a financial advisor to help you pick the right plan for you and guide you through the entire college savings process. Nebraska stands out for the variety of plans it offers and its high $400,000 maximum contribution limit.
|Plan Name||Program Type||How to Enroll||Fees|
|NEST Read Review||College Savings Plan||Direct-Sold||0.20% - 1.29%|
|The TD Ameritrade 529 College Savings Plan Read Review||College Savings Plan||Direct-Sold||0.51% - 1.48%|
|State Farm College Savings Plan Read Review||College Savings Plan||Direct-Sold||0.38% - 1.03%|
|NEST Advisor 529 Plan Read Review||College Savings Plan||Advisor-Sold||0.20% - 2.27%|
NEST Direct College Savings Plan
As college costs are expected to continue climbing within the next decade, parents are looking for better ways to slash the price tag for their children’s future education. The Nebraska Education Savings Trust (NEST) direct-sold college savings plan allows you to invest in your child’s future with no minimum opening contribution. This is a perk not many state-sponsored 529 plans offer. The NEST direct plan also offers several investment portfolio options designed for savers at all risk levels, and you can even invest in an FDIC-insured savings account. If you’re new to investing, you may be interested in the plan’s age-based portfolios. These options automatically change their asset allocation, or the mix of stock funds, bond funds and other securities they invest in. Any U.S. citizen can open an account, but Nebraska families can deduct up to $10,000 from their state taxable income per account per year—a sizable amount compared to other state 529 tax deductions.
How Do I Enroll in the Nebraska 529 Plan?
You can enroll online or you can download an enrollment form to mail in. You can contribute as little or as much as you want to open an account and there is no subsequent minimum contribution amount. To sign up, you’d need the following information about yourself and your beneficiary: your full names, address, Social Security number of Tax Identification number and bank account and routing number if you’re making an initial payment online.
How Much Does the Nebraska 529 Plan Cost?
Unlike 529 College Savings Plans sponsored by some states, the Nebraska plan doesn't charge fees for enrollment or changing investment options.
With the exception of the Banking Savings Individual Investment option, each portfolio in the plan carries a total annual asset-based fee that combines the fees for program management, state administration and underlying fund expenses.
The total annual asset-based fees currently range from 0.20% to 1.29%. These fees aren’t charged out of pocket directly but rather are factored out of your account balance. Compared to several direct plans sponsored by other states, portfolio fees for the Nebraska option go from low to slightly higher than most.
Tax Benefits of The NEST 529 Plan
Nebraska taxpayers who open accounts with Cornhusker State-sponsored 529 college savings plans deduct up to $5,000 or $10,000 (if married filing jointly) from their state taxable income per account per year. However, Nebraska-sponsored 529 plans are open to all U.S. citizens regardless of state residency.
All account holders can enjoy tax-exempt earnings on their contributions as long as their money is invested. This means your money will grow without being subject to taxation and it can thus make the most out of compound interest. To get a clearer picture of what your savings might look like in time, you can use our investment calculator.
Your withdrawals will be be tax-free as long as you use them for qualified higher education expenses such as tuition and mandatory school fees. You can use the funds at virtually any accredited post secondary school in the U.S. that accepts financial aid assistance from the U.S. Department of Education. Eligible schools span from traditional four-year colleges and universities to trade schools and institutions in specific fields of study. Even some foreign schools are eligible.
However, you may run into some roadblocks if you make a nonqualified withdrawal, which is triggered when you take money out of the plan for anything other than a qualified higher education expense. The earnings portions of nonqualified withdrawals are subject to federal income tax as well as a 10% penalty, and you may need to payback previously claimed deductions.
You should seek a financial advisor or qualified tax professional to discuss how any nonqualified withdrawal would affect you based on your unique situation.
But if you use your funds as they were meant to be used, you should be able to enjoy all of the plan’s tax perks. Remember, you can use that money in conjunction with scholarships and financial aid. In fact, the NEST direct- and advisor-sold plans both sponsor a variety of scholarships each year. Some are even open to kids ranging from children in kindergarten to teens in the 8th grade.
What Are My Investment Options?
The NEST direct 529 plan offers a variety of investment portfolio options you can choose from. One type that may be suitable for new investors is the age-based portfolio. Generally speaking, these types of portfolios automatically change their investment mix to become less risky as your child gets older and closer to the college years.
However, the NEST plan allows you to pick an age-based portfolio based on your own risk level. Your choices are conservative, index, growth and aggressive. So if you have a high risk tolerance, you may find the aggressive option suitable. This portfolio would still invest a decent portion of your money in stock funds, which are considered riskier but have the potential for strong growth. It's conservative option on the other hand will be entirely invested in bond funds and money market accounts by the time your child turns 19.
If you’re not sure what your risk level is, you can use our asset allocation calculator to find a good investment mix that reflects yours. You can use this information to explore which of the NEST plan’s static portfolios may suit you.
The asset allocations for static portfolios are meant to stay constant throughout, and they’re based on a specific risk level. Your options are growth, balanced index and conservative. The growth static option is the most aggressive of the three and invests heavily in stock funds. The balanced index option aims for steady growth and protection of earnings.
In addition, you can choose to invest in one or more individual portfolios. Each invests entirely in a single underlying mutual fund and offers exposure to different asset classes including stocks, bonds and real estate. A variety of leading investment management firms such as T. Rowe Price, iShares and Goldman Sachs manage underlying funds in the plan’s individual portfolios.
But if you have a low risk tolerance, been saving for a while and believe it’s time to protect what you’ve earned, you can also invest the plan’s FDIC-insured savings account from First National Bank of Omaha.
How Do I Withdraw Money from the NEST 529 Plan?
You can request a withdrawal from your NEST plan by visiting your account online. Or you can download a withdrawal request form and mail it in.
The TD Ameritrade 529 College Savings Plan
How Do I Enroll in Nebraska’s TD Ameritrade 529 College Savings Plan?
You can open an account through TD Ameritrade’s website. You’d need the following information for yourself and your beneficiary: your names, address, Social Security number or Tax Identification Number and your bank account and routing numbers to make an initial payment electronically.
How Much Does the TD Ameritrade 549 Plan Cost?
The TD Ameritrade 529 College Savings Plan offers portfolios with fees slightly higher than those of the NEST direct-sold plan. Total annual asset-based fees range from 0.51% to 1.48% and they include TD Ameritrade sub administration fees.
The TD Ameritrade 529 plan doesn’t charge any fees for cancellation, changing beneficiaries or switching up investment portfolios.
Tax Benefits of the TD Ameritrade 529 Plan
By investing in the TD Ameritrade 529 College Savings plan, you'll receive the same tax benefits that every Nebraska-sponsored 529 plan sponsors. This means your contributions and earnings grow tax-deferred. Withdrawals for qualified higher education expenses are tax-free as well, and Nebraska residents can deduct up to $5,000 or $10,000 (if married filing jointly) from their state taxable income.
What Are My Investment Options?
The Ameritrade 529 plan offers the same types of portfolio options as the NEST direct-sold plan. You can choose from age-based portfolios based on four risk levels: aggressive, growth, index and conservative. The plan also offers three static portfolios based on specific risk levels. You can also choose from 17 individual portfolios.
How Do I Withdraw Money from the TD Ameritrade 529 Plan?
You can request a withdrawal online by visiting your account page.
State Farm College Savings Plan
The State Farm College Savings Plan recently underwent some major changes in management and structure, which could result in added savings for future account holders. For starters, the plan eliminated sales charges on share Class A units. Previously, sales charges could rise to more than 5%. And although it offers a smaller investment-option menu and a shigher opening minimum than other plans sponsored by Nebraska, its fees are overall very reasonable compared to advisor-guided plans sponsored by other states. You can open an account by contacting a State Farm representative who can guide you through the enrollment and investment selection process. You can always contact your representative should any questions or concerns arise.
How Do I Enroll in State Farm’s 529 Plan ?
You can enroll in the State Farm College Savings Plan sponsored by the state of Nebraska by contacting a State Farm representative. You can reach one by dialing 1-800-321-7520.
How Much Does the State Farm Plan Cost?
Each portfolio in the State Farm 529 College savings plan carries a total underlying investment expenses and plan fee that currently spans from 0.38% to 1.03%. This includes the program management fee, state administration fee and underlying fund expenses. The plan currently only offers share Class A units. However, the plan recently eliminated initial sales charges on purchases of Class A units. This is a significant benefit as sales charges can significantly eat away at your investments in other advisor-guided 529 plans. In addition, the total underlying fund expense and plan fees are significantly lower than total fees charged by advisor-guided plans sponsored by other states.
Tax Benefits of the State Farm 529 Plan
Tax Benefits for the State Farm Plan are the same as those for all other Nebraska-sponsored 529 College Savings plans. These include tax-deferred growth on your contributions, tax-free withdrawals for qualified higher education expenses and tax-deductible contributions up to $10,000 for Nebraska families. Speak to your advisor about additional tax benefits that may apply to your individual situation.
What Are My Investment Options?
The State Farm 529 Plan offers a smaller amount of portfolio options than the NEST advisor-sold plan. Each one is composed of underlying funds managed by OppenHeimer funds, an established financial services firm.
You can choose from five static portfolios and four age-based portfolios. Each static option invests in different asset classes based on a specific risk level. They are as follows: growth, moderate growth, balanced and money market. The growth option is the plan’s most aggressive option, and it invests entirely in stock funds. It could suit you if you have a high risk tolerance or if you have plenty of years to save before your child is ready for college. The most conservative option is the portfolio that invests entirely in a money market account (MMA). This one aims to protect what you’ve already earned. For example, your advisor may suggest you move into this option after you’ve saved in an age-based or static portfolio.
How Do I Withdraw Money from The State Farm 529 Plan?
You can request a withdrawal by visiting your account online or by contacting your State Farm representative.
NEST Advisor 529 Plan
With the guidance of a qualified financial advisor, you can open an account with the NEST Advisor 529 Plan. This financial professional would guide you through the enrollment process and help you mold a college savings roadmap that’s unique to your financial situation and goals. In addition, there is no minimum contribution to open an account, which is rare for advisor-sold plans across the country. However, professional guidance obviously comes at a price. In addition, the plan offers many of the same portfolios found in the direct-sold option, but they may carry higher fees in order to compensate the advisor and other intermediaries. You should carefully weigh the pros and cons of both NEST plans as well as those other states sponsor.
How Do I Enroll in the NEST Advisor 529 Plan?
You can find a qualified financial advisor to open an account. But keep in mind that not all advisors are created equal. You should ask your advisor questions, especially about their credentials and certifications.
Financial advisors are held to different standards based on their certifications. Registered Investment Advisors (RIA)s are registered with a state’s securities agency or the Securities Exchange Commission (SEC), a federal entity that imposes strict standards on its members. Fiduciary advisors and RIAs are legally obligated to prioritize your best interests when providing advice.
How Much Does the Nebraska Advisor-Sold Plan Cost?
Because you’d be receiving professional guidance, investing in the NEST advisor-sold plan may be more expensive than contributing to the direct-sold option in the long run. But if you value the aid of a professional while investing in your child’s future, this plan may be right for you.
Advisor-sold plans typically involve fees not seen in the direct-sold plans including sales loads charged to compensate the advisor for offering a mutual fund.
For portfolios with share Class A, the NEST plan charges an up-front sales load, which is factored out of your contributions. It is maxed at 3.50% and can be decreased as your balance increases. For portfolio options with share Class C, the plan may charge a deferred sales charge which usually kicks in when you withdraw money from the plan. It’s currently maxed at 1%. It can be reduced or waived as well in specific situations as well.
Each portfolio in the advisor-sold plan also charges an annual asset-based fee that currently ranges from about 0.20% to 2.27% depending on the portfolio you’ve selected.
To save as much as you can, your best bet is to have a thorough conversation with your advisor about the best investment option for you, the right share class choice and how all fees involved apply to your particular situation.
Tax Benefits of the Nebraska Advisor-Sold 529 Plan
As a 529 College Savings Plan, the NEST advisor-sold option offers the same tax benefits as its direct-sold counterpart. Any account holder can enjoy tax-exempt earnings on their contributions as well as tax-free withdrawals when used on qualified higher education expenses. 529 plans also offer exclusive estate-tax benefits and different ways to give money to students to avoid a gift tax. Speak to your advisor about how you can make the most out of these perks based on your unique situation.
However, you’d also run into the same tax pitfalls for making nonqualified withdrawals. Speak to your advisor about any tax-related consequences and how best to avoid them. Remember, you can make the most out of your 529 plan by using it as it was intended: to pay for your beneficiary’s college education.
What Are My Investment Options?
The NEST Advisor 529 plan offers some of the same portfolio options as its direct-sold counterpart. However, it offers some individual portfolios not found in the direct-sold plan’s menu, and some portfolios have slight variations in underlying funds.
You can choose from age-based portfolios, static portfolios and individual portfolios. Underlying funds in these portfolios come from major investment firms such as Vanguard and American Funds.
How Do I Withdraw Money from Nebraska’s Advisor-Sold Plan?
You can request a withdrawal by visiting your account online or contacting your advisor. If you’re not sure about how to seek a financial professional, you can use our SmartAdvisor matching tool find advisors in your area including ones that specialize in helping families save for college. You can also compare their qualifications, certifications and other credentials.