Florida 529 College Savings Plan

The Florida 529 College Savings Plan has always been something I’ve been familiar with. This is largely because I currently live in the state. When researching plans for my children, this 529 plan (along with the Florida Prepaid) were in consideration.

I eventually chose the New York 529 plan because my parents had one for me and we have seasoned advisors at our disposal to help set it up.

However, the Florida 529 Plan is a great option as well for those in the sunshine state.

The Florida Prepaid College Plan has a Florida residency requirement and is the largest prepaid plan in the nation.

It offers a dormitory option in addition to its tuition and fees packages. The Florida 529 plan hires outside investment managers to manage the program portfolios.

Florida 529 vs. Florida Prepaid

It’s important to tackle the difference between a Florida 529 Plan and the Florida Prepaid Plan.

I often hear people confuse them and although their intent is similar, there are some key differences.

Florida 529 Facts

  • Save at own pace.
  • Choose your investment options.
  • Can enroll at any time and at any grade.
  • Parent or guardian must have been a Florida resident for the past 12 months.
  • Covers qualified education expenses (tuition, local fees, health fees, housing, and transportation).
  • Plan can be used nationwide.
  • No set time period for using plan.
  • If scholarship is received then 529 plan can be used to make up the difference in higher-education expenses.
  • Earnings are tax-free when used for qualified higher education expenses.
  • No minimum contribution.
  • Comes with degree of risk based on investment options.
  • Can transfer plan to another eligible child.
  • No tax deductions for single and joint filers.

Florida Prepaid Facts

  • Prepay the future cost of tuition and fees.
  • Can enroll at any time (newborn – 11th grade).
  • Parent or guardian must have been a Florida resident for the past 12 months.
  • Covers tuition and other fees at a Florida College or State University.
  • Plans designed to be specifically in Florida but it can be applied at other schools.
  • If scholarship is received, then you can get a refund for the same about as the plan would pay at a public Florida University.
  • Must use plan ten years from the child’s projected college enrollment year that was selected on the application.
  • Earnings are tax-free when used for qualified higher education expenses.
  • There are three payment options; monthly, five-year, or lump sum.
  • Plans are guaranteed by State of Florida so one cannot lose money.
  • Payments can be refunded if child does not go to college.

Florida 529 Eligibility, Tax Benefits, and Contributions.

Unlike the New York 529 Plan, Florida requires that the beneficiary must be a Florida resident at time of enrollment.

U.S. citizens and resident aliens at least 18 years old can participate in the program.

The Florida 529 plan offers your basic standard federal and state tax benefits, but no special state income tax benefits on contributions are offered. This is because Florida does not have a personal state income tax.

Contributions are eligible for the annual gift tax exclusion of $15,000. Those contributions above the annual gift tax exclusion are eligible for 5-year gift tax which permits the lump sum contribution of up to $75,000.

Earnings accumulate on a tax-deferred basis and qualified distributions for k-12 tuition and higher education expenses are entirely tax-free. The earnings portion of a non-qualified distribution is taxed at the beneficiary’s rate and is subject to a 10% federal tax penalty.

The Florida 529 Plan has no minimum contributions and will accept contributions until all account balance for the same beneficiary reach an amount of $418,000.

Investment Options, and Fees

There are three types of investment options that the Florida 529 Plan offers and they are: Age Based Investments, Static Investment, and Individual Investment Options.

Let’s see how they differ and what they are all about.

Age Based Investments

This option has your asset allocation programmed to change over time.

When your child is young, they are invested aggressively and if college is sooner for those beneficiaries then funds are invested much more conservatively.

Static Investment

The static investment option means that this will not change over time. This option does not use mutual funds, such as stable-value option, guaranteed options, and CD options. Account owners may create a customized portfolio from six predesigned options which includes three multi-manager static options, three static passive options, and seven individual fund options.

Those 6 options are named:

  • Multi-Manager Income Portfolio
  • Passive Growth Portfolio
  • Passive Blended Portfolio
  • Passive Income Portfolio
  • Multi-Manager Growth Portfolio
  • Multi-Manager Blended Portfolio

Individual Investment

Also known as the single-fund option, this portfolio is invested in a single mutual fund. The name of the 529 Portfolio is similar to the name of the underlying mutual fund.

Some of the funds offered are:

  • Small/Mid Cap Equity Fund
  • Core Fixed Income Fund
  • Money Market Fund
  • Total U.S. Equity Index Fund
  • Large Cap Growth Equity Fund
  • Large Cap Value Equity Fund
  • International (Developed) Fund

The Fees and expenses are pretty minimal for the Florida 529 Plan. If you directed enroll, there is no enrollment or application fee, account maintenance fee, or program management fee.

The expenses of the investments are:

  • 0.15%-0.22% – in the Age-Based
  • 0.07% – 0.22% – in the Static Portfolio
  • 0.02% – 0.61% – in the Individual Option

The total asset-based expense ratio is anywhere between 0.02%-0.61%.

How to Enroll in a Florida 529 College Savings Plan

Opening a Florida 529 Savings Plan is free, simple, and easy. You can head over to here to get started: Florida 529.

Once you create an account you will:

  • Choose a 529 plan
  • Determine the type of plan account
  • Complete the 529 plan application
  • Fund the 529 Plan
  • Choose Investments for the Plan

Please ensure that you remember and have the following information handy:

  • Account owner address, birthdate, and social Security Number.
  • The child or legal guardian must be a Florida resident for the past 12 months.
  • Bank account routing information for automatic deposits.
  • Beneficiary address, birthdate, and social security number.

Remember that the direct plans mean that you enroll in them yourself however you can always consult a financial advisor for more guidance and advice.

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