New York 529 College Savings Plan

The New York 529 College Savings Plan sounds fancy right? I mean I feel fancy even saying it. I have an affinity for the New York 529 due to the fact a) I was born there and b) my parents had a New York 529 for me and c) I have a New York 529 for my children.

It is ranked as one of the better 529 plans as we have discussed in our recent 529 College Savings Plan post.  

But we are here for more details than just saying it’s ranked as one of the best 529 plans right? So let’s see all the things we need to know about the Empire States 529 College Savings Plan!

New York 529 Types of Plans

The state of New York offers two 529 college savings programs that an interested party can choose from. Those two plans are:

  • New York’s 529 College Savings Program – Direct Plan
  • New York’s 529 Advisor – Guided College Savings Plan

Let’s take a look at their differences below.

New York’s 529 College Savings Program – Direct Plan

New York’s direct-sold 529 college savings plan is available to residents of any state.

Its low fees and varied investment options make it very appealing.  

In this plan you can enroll and set up all by yourself.   

Here are some more facts about the New York 529 Direct Plan:

  • Founded in 1998, but changed significantly in 2003.yo
  • New York residents enjoy a state tax deduction for their contributions to the plan.
  • No state residency requirement.
  • No age restrictions.
  • Maximum contributions for plan cannot exceed $520,000.
  • No minimum contributions.

New York’s 529 Advisor – Guided College Savings Plan

The guided college savings plan is different as you employ a financial advisor to help you set it up.

This plan features age-based, static asset-allocation, and single-fund portfolios utilizing mutual funds from JPMorgan and SSGA.

Here are some more facts about the Guided College Savings Plan

  • Founded in 2003.
  • No state residency requirement.
  • No age restrictions.
  • Maximum contributions for plan cannot exceed $520,000.
  • Minimum initial contribution is $1,000 per account. After that a minimum contribution amount is $25 per account.

New York 529 Plan Features

Each 529 college savings plan comes with a variety of features and the New York 529 plan has many for sure. Now these features are specific to the New York’s 529 College Savings Program – Direct Plan.

  • Flexible use of savings
  • Tax Benefits (sell below for more details)
  • Additional tax benefits for New York residents
  • Easy setup
  • Low Costs
  • Can open additional accounts for the same child
  • Convenient ways to contribute
  • Diverse investment options

New York 529 Fund Selection

For the Direct New York 529 plan, there are 13 individual portfolio/fund options.

A few things to keep in mind is that:

  • One can only move money from one portfolio twice a year.
  • Portfolios won’t automatically become more conservative over time.
  • The market may cause your investment mix to change. This means it will be important to be on top of your investments.

Types of New York 529 Portfolios

Here are all the types of portfolios the direct plan has to offer:

  • Aggressive Growth Portfolio
  • Developed Markets Index Portfolio
  • Mid-Cap Stock Index Portfolio
  • Growth Stock Index Portfolio
  • Value Stock Index Portfolio
  • Small-Cap Stock Index Portfolio
  • Aggressive Portfolio
  • Growth Portfolio
  • Blended Growth Portfolio
  • Moderate Growth Portfolio
  • Disciplined Growth Portfolio
  • Conservative Growth Portfolio
  • Conservative Portfolio
  • Bond Market Index Portfolio
  • Inflation-Protected Securities Portfolio
  • Income Portfolio
  • Balanced Income Portfolio
  • Conservative Income Portfolio
  • Interest Accumulation Portfolio

You can also see the portfolio price and performance by going to here: Portfolio price and performance.

Conservative vs Moderate vs Aggressive age-based option

Overwhelmed yet? I mean a lot of things to remember especially with all the options one has at their disposable.

If you chose to go the direct plan route, you will need to pick one of the age-based options.

You will have to match it with your child’s age and comfort level of risk.

To make things easy to digest, let’s see how the conservative, moderate, and aggressive options differ from each other:

Conservative age-based option

  • Child 0-4 years
    • Blended growth portfolio – 62.5% stocks and 37.5% bonds
  • Child 5-6 years
    • Moderate growth portfolio – 50% stocks and 50% bonds
  • Child 7-8 years
    • Disciplined growth portfolio – 37.5% stocks and 62.5% bonds
  • Child 9-10 years
    • Conservative growth portfolio – 25% stocks and 75% bonds
  • Child 11-12 years
    • Conservative portfolio – 12.5% stocks and 87.5% bonds
  • Child 13-14 years
    • Income portfolio – 75% bonds and 25% short-term reserves
  • Child 15-16 years
    • Balanced income portfolio – 50% bonds and 50% short-term reserves
  • Child 17-18 years
    • Conservative income portfolio – 25% bonds and 75% short-term reserves
  • Child 19 and up
    • Interest accumulation portfolio – 100% short-term reserves

Moderate age-based option

  • Child 0-4 years
    • Aggressive portfolio – 87.5% stocks and 12.5% bonds
  • Child 5-6 years
    • Growth portfolio – 75% stocks and 25% bonds
  • Child 7-8 years
    • Blended growth portfolio – 62.5% stocks and 37.5% bonds
  • Child 9-10 years
    • Moderate growth portfolio – 50% stocks and 50% bonds
  • Child 11-12 years
    • Disciplined growth portfolio – 37.5% stocks and 62.5% bonds
  • Child 13-14 years
    • Conservative growth portfolio – 25% stocks and 75% bonds
  • Child 15-16 years
    • Conservative portfolio – 12.5% stocks and 87.5% bonds
  • Child 17-18 years
    • Income portfolio – 75% bonds and 25% short-term reserves
  • Child 19 and up
    • Income portfolio – 75% bonds and 25% short-term reserves

Aggressive age-based option

  • Child 0-4 years
    • Aggressive growth portfolio – 100% stocks
  • Child 5-6 years
    • Aggressive portfolio – 82.5% stocks and 12.5% bonds
  • Child 7-8 years
    • Aggressive portfolio – 82.5% stocks and 12.5% bonds
  • Child 9-10 years
    • Growth portfolio – 75% stocks and 25% bonds
  • Child 11-12 years
    • Blended growth portfolio – 62.5% stocks and 37.5% bonds
  • Child 13-14 years
    • Moderate growth portfolio – 50% stocks and 50% bonds
  • Child 15-16 years
    • Disciplined growth portfolio – 37.5% stocks and 62.5% bonds
  • Child 17-18 years
    • Conservative growth portfolio – 25% stocks and 75% bonds
  • Child 19 and up
    • Conservative portfolio – 12.5% stocks and 87.5% bonds

New York 529 Plan Rules

All 529 college savings plans have rules or guidelines that one will need to know.

Those are as follows:

  • Anyone can open up the 529 account as long as they are a U.S. citizen or resident alien.
  • There are options for every level of investor.
  • Choices will depend on how comfortable you are with risk.
  • The beneficiary is the future student you open the account for.
  • If beneficiary doesn’t go to college then you change the beneficiary to another eligible family member.

New York 529 Plan Contribution Limits

There are no annual contribution limits for the New York 529 Plan. There is an annual gift tax exclusion and 5-year gift tax-averaging.

Contributions that exceed the annual gift tax exclusion of $15,000 per beneficiary may be subject to gift taxes if the contribute does not wish to use 5-year gift tax averaging.

If the contributor does elect to use the 5-year gift tax averaging, then a single contributor may give a lump sum of up to $75,000 per beneficiary. A couple giving together may give a lump sum of up to $150,000 per beneficiary.

New York 529 Plans have the highest cumulative contribution limit of $520,000 per beneficiary.

New York 529 Tax Benefits

If you live in New York then single taxpayers can get a New York State income tax deduction of up to $5,000 and married couples (who file jointly) can get a deduction of up to $10,000.

For the rest of us, state tax benefits for non-resident New York taxpayers may vary. State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan or non-qualified withdrawals.

Please consult your tax advisor for more information to your specific situation.

New York 529 Downside

This is more of a general downside with 529 college savings plans and that is financial aid eligibility, which is directly impacted when there is money in a 529 plan.

It’s suggested to have the money in the parents name as opposed to the students.

A student’s assessment rate on the FAFSA is high at 20% while for parents it’s assessed at 5.65%.

Another downside is that while your money can be withdrawn for any reason if it’s not demonstrated as a qualified educational expense, withdrawals will be subject to income taxes and a 10 percent penalty which again is not just specific to the New York 529 plan.

How to Open a New York 529 Plan

It is super simple to open a New York 529 plan. You can enroll right on the New York 529 College Savings website. Just make sure you have the following information handy:

  • Address and social security.
  • Successor information (in the event of death).
  • Beneficiary details (birthdate, social security).
  • Investments you wish to pursue.
  • Bank account number.
  • Payroll deduction information.

How to Withdraw from a New York 529 Plan

Your account can be used for any purpose but remember to qualify for tax-free withdrawals then it must be used for qualified expenses for the beneficiary and at an eligible educational institution.

To withdraw is simple as you will just need to:

  • Log on to your account.
  • From your accounts, chose the account to act on.
  • On the overview page under investments, select to make a withdrawal.
  • Select “yes” for a qualified withdrawal.
  • Submit request.

New York 529 Fees

The New York 529 Direct Plan has some of the lowest cost fees. You will only pay $1.30 in fees per year for every $1,000 you invest in the plan (0.13% total annual asset-based fee). There are also no advisor fees, commissions or account maintenance fees with the direct plan.

Final Thoughts

So I am biased and partial to the New York 529 plan. However, that doesn’t mean there aren’t other great ones out there as well. In fact, we will be talking about them as well.

Do your research and make sure you come to a decision as to if you want enroll and manage yourself (The Direct Plan) and/or have the help of the advisor (Guided Plan).

Whichever option you chose, you see how easy it is to set up and how totally affordable it is to establish a 529 college savings plan for your child.

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