The NextGen College Investing Plan® is a Section 529 Plan
— designed to help families achieve their dreams of providing funding
for higher-education costs for the next generation. Section 529 Plans
have been around since 1996 and have become a popular way of investing
for college costs because of the advantages they can offer.
With a NextGen account, the account owner retains control over the funds in the account. The beneficiary — your child, grandchild, niece, nephew or anyone else you name — has no access to the assets in the account. Decisions about the account investments and how the funds are used are always in your hands.
If it happens that your beneficiary does not need to use the account funds for higher education costs, you have several options, such as changing the beneficiary1 or withdrawing the funds. Keep in mind: any earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% additional federal tax as well as state and local income taxes.
- Parents, grandparent or even family friends can open a NextGen account. You can even open a NextGen account for yourself and pursue your own post-secondary education!
- Assets in a NextGen account may be used at any U.S. accredited post-secondary institution. Accredited institutions are those eligible to participate in federal financial aid programs, and include some foreign institutions.
- NextGen offers multiple professional investment choices, and you can move your assets between different investment portfolios should you find your investment needs change. Please remember there’s always the potential of losing money when you invest in securities.
You can make contributions as small as $50 and currently up to as much as $380,000 per beneficiary. There are no limitations on who can make contributions to your NextGen account — parents, grandparents, friends or family.
Once you open a NextGen account, you can arrange to have contributions automatically made to your account from a checking or savings account, or through payroll deduction. Check with your employer to find out if they can process payroll direct deposits.
Earnings, if any, in a NextGen 529 account have the opportunity to grow tax-free. And, withdrawals, including any earnings, used to pay for the account beneficiary’s qualified higher education expenses are not subject to federal (or possibly state) income tax.2 Click here to get information on special benefits for Maine residents.
By investing money for college on a regular basis, you can take advantage of dollar-cost averaging. A time-tested investment strategy, dollar-cost averaging allows an investor to purchase securities in fixed dollar amounts regularly (as little as $50 per month) at fixed intervals, regardless of how the security is performing.3 As a result, you may build a portfolio over time, without trying to predict market cycles. As you can see by the hypothetical example below, making monthly contributions can help your savings to grow, assuming investments earned a hypothetical 8% rate of return compounded annually.
When a security is performing well and has a higher purchase
price, you buy fewer shares, but when the security is down in
price, your dollars are at work buying more shares.3 In
this way, you are investing the same amount in your NextGen account
whether the market is up or down.
The graph is illustrative only and does not reflect an actual investment in the NextGen College Investing Plan or taxes, if any, payable upon withdrawal. It does not take into account costs or fees that may be associated with a particular investment. Contributions are subject to market and other investment risks. Returns on contributions to the NextGen College Investing Plan are not guaranteed and may be less than or greater than the amount invested.
The NextGen College Investing Plan is professionally managed. The Finance Authority of Maine (FAME) is the program administrator and works with an Advisory Committee on College Savings, whose members are appointed by the Governor of Maine and which is chaired by the Maine State Treasurer. The Program Manager is Merrill Lynch, Pierce, Fenner & Smith Incorporated.
1 Some restrictions apply. You are generally permitted to change the beneficiary to another qualified member of the family, as defined under the Internal Revenue Code, without triggering income tax and 10% additional federal tax. Not applicable for accounts opened under a Uniform Gifts/Transfers to Minors Act registration.
2 To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for “qualified higher education expenses,” as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax as well as state and local income taxes.
3 Dollar-cost averaging and other periodic investments do not assure a profit and do not protect against loss in declining markets. Such a plan involves continuous investment in securities, regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue their purchases through periods of high or low price levels.
Call NextGen at
1-877-4-NEXTGEN
(1-877-463-9843).
Maine residents can call
1-800-228-3734.
