Constantly rising tuition costs for higher education and an ever-challenging economic climate have many families in Rhode Island looking to state 529 plans for socking away college savings for their children's futures. With many benefits including federal and state tax benefits, 529 plans also offer parents a way to stay in control of the funds that they are saving for education expenses.
One of the primary aims of these
529 plans is to make saving easy. According to Savingforcollege.com, parents or donors will not even receive a Form 1099 to report the earnings at tax time until the actual withdrawal is made. Additionally, these accounts allow for large deposits and increased flexibility when it comes to moving the money around.
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Rhode Island's 529 plan, dubbed CollegeBound
fund, is available as both a direct-sold version as well as an advisor-sold version. Although the direct-sold version has been rated higher, it is available only to those who meet certain specific state residency requirements.
Like many other such plans, the minimum initial contribution is only $25, and subsequent minimum contributions remain at $25 as well. CollegeBound
fund has no enrollment, application, or maintenance fees. Adding to the simplicity of the plan, the entire enrollment and funding process can be completed online on the CollegeBound
fund website.
Rhode Island will exclude the value of this 529 plan for state financial aid purposes as well, which means that being the beneficiary of one of these accounts will not prevent a student from receiving financial aid that they might otherwise be entitled to.
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While it is managed by AllianceBernstein, CollegeBound
fund is sponsored by the Office of Rhode Island General Treasurer and also by the Rhode Island Higher Education Assistance Authority. Investors should not let this sponsorship confuse them, however. While these institutions make the regulations for the 529 plan and oversee it, they in no way guarantee the investments,
as stated in the fine print on the plan's website.
For those looking to get a jump start on the college savings game, Rhode Island's plan also offers CollegeBound
baby, an enhancement of CollegeBound
fund, which allows for a $100 grant for children born to or adopted by Rhode Island families after the beginning of 2015. The grant will be invested in a CollegeBound
fund account.
Although the plan does offer some considerable benefits, it should be noted that it was listed by Morningstar as
one of the nation's seven worst 529 plans, according to CBS News in 2011. Since then, however, enhancements have been made to the program including
adding a passively managed age-based index portfolio.
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