Changing Investments With Utahs 529 Plan
If youâve already signed up for a 529 plan in Utah or would like to sign up but worry about locking yourself into a fickle portfolio, know that you do have the option to change your investments. Generally, reallocations are limited to two per year, though you may be able to get around that restriction by changing beneficiaries at the same time.
In addition to the movement of funds within an account, owners have the option to change how future contributions are invested at any time without using up one of their two annual changes. If you see that another portfolio is doing better than your own, you can always shift investments and take advantage of that new performance trend instead.
Do 529 Plans Charge A Lot Of Additional Fees
The answer is that it depends. Some 529 plans charge additional account or maintenance fees, but many do not. In our ratings methodology, plans with low fees relative to peers are more attractive, as the hurdle to generating performance is reliably lower than more expensive peers.
Seventeen plans offer target-enrollment or age-based series with very low costs. As of December 2021, the three largest direct-sold plans were New York’s 529 Program , The Vanguard 529 College Savings Plan , and Utah’s my529. These plans’ target-enrollment or age-based options hold almost the same lineup of underlying funds–Vanguard Total Stock Market Index , Vanguard Total International Stock Index , Vanguard Total Bond Market II Index , and Vanguard Total International Bond Index . The Nevada and Utah series carry the same fees of 0.14%, while the New York series is slightly cheaper at 0.12%, and each plan does not charge any additional account or maintenance fees. These fees are competitive with those of Vanguards four LifeStrategy funds, which comprise the same aforementioned index funds and cost between 0.11% to 0.14%. Exhibit 1 below lists plans that offer series with very low costs.
Conversely, there are many plans that offer series that charge relatively unattractive fees of 0.50% or more. These plans typically carry high state fees and/or high program management fees.
Where Do You Live
Depending on your state of residence, a Fidelity-managed, state-specific plan may be a good option for you. If Fidelity does not manage a plan for your state, you may want to consider our national plan, the UNIQUE College Investing Plan . Be sure to consider your own or the beneficiary’s home state 529 plan as some states offer favorable tax treatment or other benefits to their residents only if they invest in their own state’s 529 plan.3
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Utah 529 College Savings Plan
About: 529 plans are tax-advantaged savings vehicles designed to encourage individuals to begin to save for the future costs of higher education. The Utah Educational Savings Plan , a nonprofit trust fund, is the official and only 529 plan established and sponsored by the State of Utah. You do not have to be a Utah resident to participate in UESP. UESP is a direct-sold 529 plan, which means you can set up an account and make contributions by dealing directly with UESP.
Phone #: 1-800-418-2551
Investment Options: Four age-based investment options, with different underlying investments and risk levels, are offered. A fifth, the Customized Age-Based investment option allows for a customized account asset allocation from as many as 22 underlying investments, and automatically reallocates to a new customized underlying investment allocation each time the beneficiarys age qualifies for the next of seven possible age brackets.
Eight static investment options are offered, a ninth, the Customized Static Option, allows for a customized mix of investments using as many as 27 underlying fund choices. Investments are managed by 16 Vanguard mutual funds, six Dimensional mutual funds, FDIC-insured accounts held in trust by UESP at Sallie Mae Bank and U.S. Bank National Association (U.S. Bank, and the Utah Public Treasurers Investment Fund.
State Residency Requirements: No state residency is required to participate in Utah 529 College Savings Plans.
Explore The Investment Options
Two Customized options
- You can create a unique investment allocation for your client from the underlying investments that my529 offers.
- The customized allocation can be age-based or static.
- Choose from a selection of Vanguard and Dimensional mutual funds, a PIMCO stable value fund, as well as FDIC-insured accounts.View details of the underlying funds.
|Customized Age-Based||You determine your clients investment allocations for each of 10 preset age brackets money is automatically reallocated to a new investment allocation when the beneficiary ages to the next bracket. This option is rebalanced on the beneficiarys birthday to preserve the original asset allocation targets.||0.140% to 0.490%|
|You determine your clients investment allocation. The allocation is fixed unless the owner requests a change. This option is rebalanced on the beneficiarys birthday to preserve the original asset allocation targets.||0.140% to 0.490%|
Twelve Enrollment Date options
|The Enrollment Date options gradually shift to a more conservative investment allocation as the target enrollment year draws closer, eventually ending up in the Enrolled option.||0.141% to 0.147%|
Ten Static options
- Unlike age-based options, static investment options do not change their allocations as your clients beneficiary ages.
- On your advice, your client may wish to change his or her account to a more conservative investment option as the beneficiary ages.
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Open A 529 Plan With A Strong Performance Trend Today
Although the details of investing in a 529 plan can quickly become complicated, the process is made much easier with help from the experts at Sootchy. Our team can provide assistance with opening a new 529 plan in Utah , managing an existing plan, or contributing to someone elseâs account. Simply download the Sootchy app or visit us online and get started today.
What Happens To A Utah 529 Plan If Not Used
There is no time in which the funds within a Utah 529 plan need to be withdrawn. Unused funds can remain in the account and continue to grow tax-deferred.The account owner may also choose to change the beneficiary, without penalty, to another individual with a social security number who is a member of the original beneficiarys family and a United States citizen. This is not limited to immediate family members funds can be transferred to cousins, nieces, nephews, and other close relatives. The account owner can close the account if not used, but funds in the account will be subject to federal and state income tax as well as a 10% penalty on the account earnings.
And as outlined earlier in this article, 529 plans allow the account owner to withdraw the amount a beneficiary receives in scholarships without incurring the 10% penalty.
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Pimco Interest Income Fund
The PIMCO Interest Income Fund, a stable value fund, is run by Pacific Investment Management Company , a Newport Beach, California, investment firm with $2.2 trillion in assets under management as of December 31, 2021.
PIMCO Interest Income Fund focuses on preserving principal and providing liquidity while generating steady returns for my529 account owners saving for higher education. The fund invests in high-quality government and corporate bonds with short- and intermediate-term maturity dates.
The investment management fee for the fund is 0.111 percent. In the future, the management fee could be higher or lower depending on the total invested assets under management.
Read the PIMCO Interest Income Fund Fact Sheet for more information.
Each Investment Option Consists Of One Or More Underlying Funds
The underlying investments are managed by Vanguard Group, Dimensional Fund Advisors, Pacific Investment Management Company , or are held in trust by my529 at Sallie Mae Bank and U.S. Bank.
Account owners do not own shares of any underlying investment. Instead, account owners own my529 units in the selected investment options issued by the my529 trust.
Read the Program Description for more information.
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Does Using A 529 Impact My Aid Package
The short answer is yes, but if you are saving for future tuition and expenses, you should still consider using a 529 plan, as investment gains from the account are not subject to capital gains taxes, if used for qualified expenses. Also, depending on where you live, there are additional tax benefits at the state level if you invest in a state-sponsored plan.
Utah Saving For College Report In 2022
We discuss the tax benefits, trends, do’s and don’ts and various plan options of setting up a 529 college savings plan in Utah
As parents, grandparents and students we know college is coming and that we’re somehow going to have to pay for it someday. Fortunately we have many options available to us including savings bonds, the stock market and 529 plans. Starting a 529 account now is always the best option, no matter how old you is. While playing the stock market may yield higher returns on your investment, placing your money into a 529 plan allows it to grow in a tax free environment. One study even found that when the federal tax benefits were taken into consideration, 529 plans outperformed their benchmarks in every category.
Utah has it’s own state-operated 529 plan called Utah Educational Savings Plan . It is important to note that your child does not have to go to a UT college or university in order to use this savings account. 529 plan funds can be used at any accredited college or university across the nation, including some K-12 private schools!
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Twelve Enrollment Date Options
- Enrollment Date options take into consideration the target year the account beneficiary will begin taking withdrawals to pay for qualified education expenses.
- These options are built from a mix of Vanguard mutual funds, the PIMCO Interest Income Fund and FDIC-insured accounts. Over time, the options gradually shift to a more conservative investment allocation as the target enrollment year draws closer, eventually ending up in the Enrolled option.
- Investment allocations automatically adjust over time based on a preset quarterly allocation schedule. Daily cash flows keep the options close to target allocations.
- The Internal Revenue Service allows you to make two option changes in a calendar year without triggering tax consequences.
Tax Benefits Of Utahs 529 Plan
Contributions toward a my529 plan grow tax-exempt, which means Uncle Sam wont touch what youve earned in the market and you can take advantage of compound interest. Withdrawals are also tax-free if they are used for qualified higher education expenses.
And although the plan is open to all U.S. citizens, Utah taxpayers get additional benefits. They may take a 5% state income tax credit on contributions up to a certain limitif the beneficiary was younger than age 19 when the account was opened. A Utah-based corporation may take a 5% tax deduction up to certain limits as well. Check with the plan as these limits are subject to change each tax year. The tax deduction limit for single filers is currently $2,040, while for married couples it is $4,080.
Its also important to note that you may face tax consequences if you make non qualified withdrawals, which are triggered when you take money out of the plan for anything other than a qualified higher education expense. The earnings portion of a nonqualified withdrawal may be subject to federal income tax and a 10% penalty. In addition, Utahns may need to pay back previously claimed state income tax credits or deductions
Very few exemptions exist for the 10% penalty such as the beneficiarys death, disability, receipt of a scholarship, or attendance at a U.S. service academy.
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What Are The Tax Benefits Of 529 Plans
When used for qualified expensesa category that includes tuition, certain room-and-board fees, required textbooks, and computersstudents can withdraw money from a 529 plan tax free.
In addition, some states offer income tax deductions for residents who contribute to their plan. A few parity states extend those tax benefits even if you pick a 529 plan from another state.
Is It Easy To Withdraw Funds
Yes. Accountholders can request a withdrawal to pay an education institution or to reimburse themselves for a beneficiary’s qualified education expenses. A request can be made online, by phone, or by mail, and payment is issued either via check or electronic bank transfer. Some plans also provide auto pay. Many families pay tuition and fees first, and then reimburse themselves from the 529 plan. No documentation is needed for withdrawals. However, it is important to keep records that prove that a withdrawal is qualified, because in the event of an audit, unqualified withdrawals may translate to paying taxes on those gains. Also, money must be withdrawn from an account in the same period that educational expenses are incurred. When withdrawals begin, the 529 plan administrator will send a 1099-Q form. If the distribution doesn’t exceed the amount of the student’s qualifying expenses, then accountholders do not have to report any of the distribution as income on their tax returns.
If a beneficiary no longer needs the money in the account , the account owner can name a new qualified beneficiary for the account without incurring federal or state income tax penalties. Qualified beneficiaries are members of the current beneficiary’s family, which includes siblings, children, nieces and nephews, their spouses, or a first cousin.
Subscribers to Morningstar.com can access our 529 plan reports and ratings from the 529 Plan Center map.
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Utah 529 Plan And College Savings Options
Utah has a 529 plan called my529 that can help you save for college. Utah does not offer it’s own Able plan.
If you live in Utah, these might be good options for you to save for college.
These programs are designed to help make college more affordable – so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.
If you’re not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?
There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Utah. Each state has different rules when it comes to 529 plan savings.
How Much Does It Cost To Open A 529 Account
Most 529 plans don’t charge you a fee for opening an account, though you will be required to make an initial deposit to start choosing investments. There are, however, fees you will need to pay to maintain your account: underlying and administrative fees. Underlying fees goes toward funds you choose within your portfolio these amounts are deducted by the funds themselves. Your 529 plan charges administrative fees for the upkeep of your account. Both types of fees are a percentage of the balance in your account.
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Best 529 College Savings Plans
Parents, no matter their preferred investing style, will love the plentiful options offered, from age-based to fully customizable portfolios. The website is very transparent about the finer details such as information on underlying funds, which include PIMCO and Vanguard. Fees are reasonable, with management fees up to 0.15% and expense ratios up to 0.33% .
Account holders can choose from age-based portfolios, which automatically rebalance to ensure the right asset allocation, moving toward more conservative investments by the time your child is ready to head off to college. There are also other options including risk-based and customizable choices. You also don’t have to worry about additional fees, so more of your money goes toward your child’s education.
Is A 529 Plan Tax Deductible In The State Of Utah
And for many, a 529 plan can be used to transfer wealth. Contributing to a 529 plan lets grandparents or other contributors reduce the size of their taxable estate while helping them fund a grandchilds or family members education. Its even possible to make five years worth of contributions in a single year, up to $75,000 and still get the gift tax exclusion.
Utah taxpayers can get tax breaks for their 529 plan contributions in the form of tax credits. For single filers, they can get 5%, up to $2,040 per year per beneficiary. Joint filers can get 5% (for up to a maximum of $4,080 per year per beneficiary.
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Utah 529 Plan Performance Trend
Understand the performance of the 529 plan you select in Utah can make a huge difference in your returns. Learn more about Utah’s 529 plan performance.
Picking the right 529 plan for your family will force you to consider a wide variety of factors, but arguably the most important one is the performance of a particular plan. After all, itâs the tax-free returns on your investments that make the 529 plan so valuable as a tool for financing college, so the greater the returns, the more useful the account. As one of the most popular types of 529 plans available today, Utahâs my529 plan has drawn high praise from many of the organizations that rate these accountsâ performance trends, but what exactly does the performance trend of Utahâs 529 plan look like? To find out, keep reading as the experts at Sootchy answer this critical question.
Choose Your Investment Strategy
my529 offers a variety of investment options 12 Enrollment Date options, 10 Static options, and two Customized options. They include funds managed by The Vanguard Group, Dimensional Fund Advisors, Pacific Investment Management Company , and FDIC-insured accounts held by Sallie Mae Bank and U.S. Bank.
You decide how aggressive you want to be with your investment based on your goals and how much time you have to save.
The Internal Revenue Service allows two investment option changes per calendar year for each beneficiary.
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