529 Plans in NJ: A Comprehensive Guide to Saving for College

College is a significant investment, and it's never too early to start saving for your child's education. A 529 plan is a tax-advantaged savings account that can help you grow your money over time. In New Jersey, there are two 529 plans available: the NJBEST 529 Plan and the CollegeBound 529 Plan.

NJBEST 529 Plan

The NJBEST 529 Plan is a state-sponsored 529 plan that offers a variety of investment options to meet your needs. The plan is managed by the New Jersey State Investment Council and is backed by the full faith and credit of the state of New Jersey.

Benefits of the NJBEST 529 Plan:

• Tax-free earnings: Earnings from your investments grow tax-free at the federal level and the state level.
• No income limits: Anyone can contribute to a NJBEST 529 Plan, regardless of their income.
• Low investment minimums: The minimum initial investment is $25, and you can make additional contributions in any amount.
• Flexible investment options: The NJBEST 529 Plan offers a variety of investment options to meet your needs, including age-based portfolios and target-date funds.
• Automatic rebalancing: Your portfolio will be automatically rebalanced to maintain your desired asset allocation.

CollegeBound 529 Plan

The CollegeBound 529 Plan is a private 529 plan that is offered by TIAA-CREF. The plan offers a variety of investment options to meet your needs, including age-based portfolios and target-date funds.

Benefits of the CollegeBound 529 Plan:

• Tax-free earnings: Earnings from your investments grow tax-free at the federal level and the state level.
• No income limits: Anyone can contribute to a CollegeBound 529 Plan, regardless of their income.
• Low investment minimums: The minimum initial investment is $25, and you can make additional contributions in any amount.
• Flexible investment options: The CollegeBound 529 Plan offers a variety of investment options to meet your needs, including age-based portfolios and target-date funds.
• Automatic rebalancing: Your portfolio will be automatically rebalanced to maintain your desired asset allocation.

Which 529 Plan is Right for You?

The best 529 plan for you depends on your individual needs and circumstances. If you are looking for a plan with low investment minimums and a variety of investment options, the NJBEST 529 Plan is a good choice. If you are looking for a plan with a wider range of investment options, the CollegeBound 529 Plan is a good choice.

How to Choose an Investment Option

Once you have chosen a 529 plan, you will need to choose an investment option. The investment option you choose will determine how your money is invested. There are a variety of investment options available, including age-based portfolios and target-date funds.

Age-based portfolios are designed to automatically adjust your asset allocation as your child gets closer to college. This can help you ensure that your investments are aligned with your child's needs.

Target-date funds are designed to invest your money in a mix of stocks and bonds that is appropriate for your child's age. The asset allocation of the fund will automatically adjust as your child gets closer to college.

How to Contribute to a 529 Plan

You can contribute to a 529 plan in a variety of ways, including:

• Payroll deduction: You can have your employer deduct money from your paycheck and contribute it to your 529 plan.
• Direct deposit: You can set up a direct deposit from your bank account to your 529 plan.
• Check: You can mail a check to your 529 plan.
• Online: You can contribute to your 529 plan online.

How to Withdraw Money from a 529 Plan

When your child is ready to go to college, you can withdraw money from your 529 plan to pay for qualified expenses, such as tuition, fees, books, and room and board. Withdrawals for qualified expenses are tax-free at the federal level and the state level.

If you withdraw money from your 529 plan for non-qualified expenses, you will have to pay taxes on the earnings. You will also have to pay a 10% penalty on the earnings.

529 Plans vs. Other College Savings Options

There are a variety of college savings options available, including 529 plans, Coverdell ESAs, and UGMA/UTMA accounts. 529 plans offer a number of advantages over other college savings options, including:

• Tax-free earnings: Earnings from 529 plans grow tax-free at the federal level and the state level.
• No income limits: Anyone can contribute to a 529 plan, regardless of their income.
• Flexible investment options: 529 plans offer a variety of investment options to meet your needs.
• Automatic rebalancing: Your 529 plan will be automatically rebalanced to maintain your desired asset allocation.

Frequently Asked Questions About 529 Plans

What is the maximum amount I can contribute to a 529 plan?

The maximum amount you can contribute to a 529 plan is $550,000 per beneficiary.

Can I use a 529 plan to pay for K-12 expenses?

No, 529 plans can only be used to pay for qualified higher education expenses, such as tuition, fees, books, and room and board.

What happens if my child does not go to college?

If your child does not go to college, you can withdraw the money from your 529 plan for any reason. However, you will have to pay taxes on the earnings and a 10% penalty.

Conclusion

529 plans are a great way to save for college. They offer a variety of advantages over other college savings options, including tax-free earnings, no income limits, and flexible investment options. If you are looking for a way to save for your child's education, a 529 plan is a good option to consider.

Additional Resources

• NJBEST 529 Plan
• CollegeBound 529 Plan
• Saving for College: A Guide for Parents