What Are the Fees in 529 Plans?

There are fees in 529 plans. Each state has various fee structures depending on the type of plan offered, with examples like New York’s 529 College Savings Program Direct Plan featuring transparency and low costs. Opening an account in this plan incurs no fees, and there’s no minimum contribution requirement. The plan applies an annual asset-based fee of 0.12%, equivalent to $1.20 per year for every $1,000 invested.

In contrast, 529 prepaid tuition plans usually have minimal fees, as the plan’s cost depends on the child’s age and grade at the time of purchase. However, some prepaid tuition plans may entail additional costs related to attendance, not included in the total tuition cost.

529 savings plans, on the other hand, may involve several fees:

Enrollment Fee: While some state-sponsored 529 savings plans waive enrollment fees for in-state residents, enrolling in an out-of-state plan might entail an enrollment fee.

Annual Maintenance Fee: Ranging from $10 to $50, this fee may be charged annually, although many state-sponsored plans reduce or eliminate it for in-state residents, those with automatic contributions, or those maintaining a minimum balance.

Administration/Management Fee: Calculated as a percentage of the plan’s account balance, this fee covers annual operating costs.

Underlying Fund Expenses: 529 savings plans typically offer a selection of mutual funds, and fees can vary based on the chosen funds.

New York’s 529 Direct Plan’s fee structure provides a helpful example, emphasizing the importance of comparing fees between plans. Understanding the fee landscape ensures you make informed decisions based on your financial goals.

Importantly, no fees should hinder your pursuit of educational savings. Professional guidance from Fee-Only financial advisers, accountants, or attorneys specializing in college planning and tax matters can be invaluable. Their expertise helps navigate these intricacies, allowing you to optimize your 529 plan contributions while minimizing any potential financial drawback.

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