Your Guide to Fidelity 529 Plans

As one of the largest brokerage firms and asset managers in the U.S., Fidelity Investments is well known among individual investors. In fact, they count over 50 million individuals among their clients. In addition to offering mutual funds and retirement accounts, Fidelity also offers eight different 529 plans. Read on to learn more about what Fidelity offers for families saving for college or other future educational expenses.

Which 529 Plans Does Fidelity Offer?

Fidelity manages five direct-sold and three advisor-sold plans from six different states. A direct-sold plan is one that you can open yourself online. An advisor-sold plan must be opened for you by a broker. 

These plans are available to residents of any state, but you may be eligible for a state tax benefit for opening your own state’s plan. Connecticut, Delaware, Massachusetts, and Oklahoma residents may receive a state income tax deduction for contributions to their home state’s plan. Residents of Arizona may receive a state tax deduction for contributions to any state’s 529 plan. New Hampshire does not have a state income tax.

Why Choose Fidelity’s 529 Plans?

There are many ways parents and other loved ones can save for college. 529 education savings plans offer tax-free earnings and withdrawals for qualified educational expenses, making them a top choice for many families. However, choosing a 529 plan from the many available options can be challenging. Here is a closer look at Fidelity’s 529 plans and some of their benefits, including convenience, various investment options, low fees, and a long track record.  

Convenient For Existing Fidelity Customers

If you are among the millions of individuals who already have a Fidelity account, you may consider adding a Fidelity 529 plan to your existing portfolio to enjoy streamlined account management and consolidated statements, with all brokerage, mutual fund, and other accounts visible on a single screen. Fidelity provides an easy online account opening process for direct-sold plans. If you work with a Fidelity financial advisor, they can help you choose a plan and open an account.

Fidelity also offers 529 account holders convenient options for growing their college savings. One is the college gifting feature, which makes it easy for family and friends to make gifts directly to your child’s 529 account. You start by setting up a gifting dashboard and creating a personalized page. You can then share a link to this page with family and friends to visit and make a gift via e-check or ACH transfer. The gifting dashboard lets you track who has made gifts and what amount. 

Another is the Fidelity Rewards Visa credit card, which provides 2% cash back on everyday spending. The card can be linked to your Fidelity 529 plan to deposit the cash-back rewards directly into your 529 college savings plan.

Age-Based and Static Portfolio Options 

When you open a 529 plan account, you’ll need to select how your contributions are invested. Fidelity 529 plans offer a range of options to suit different needs and investment styles.

With age-based or year-of-enrollment portfolios, you select a portfolio based on your child’s age or expected year of college enrollment. These types of portfolios are very popular as they automatically adjust investments as your child ages.

While your child is younger, they include higher levels of equity, which can provide greater return and greater risk. As your child approaches college, they gradually shift to more conservative investments to help preserve your earnings. Age-based portfolios can be a great option for busy parents and those who prefer not to check in and make adjustments to their 529 investments regularly.

Fidelity 529 plans offer three types of enrollment date portfolios:

• Fidelity Funds Portfolios: invest primarily in actively-managed mutual funds. These also carry the highest expense ratios.
• Fidelity Index Portfolios: invest in index mutual funds and carry lower expense ratios.
• Fidelity Blend Portfolios: invest in a combination of actively-managed and index mutual funds. Their expense ratios fall between Fidelity Funds and Fidelity Index.

If you prefer to do it yourself and more actively manage the investments in your 529 plan, Fidelity also offers static portfolios for three investment objectives: Aggressive Growth, Moderate Growth, and Conservative. Each of these is available as either an actively managed Fidelity Funds Portfolio or a passively managed Fidelity Index Portfolio. Keep in mind that you can only make two investment changes per year to a 529 plan.

Low Fee Options Available

By now, most investors are aware that fees can take a real bite out of your earnings. Fidelity 529 plans offer several low-fee investment options to help you save more. Depending on the investment option chosen, total asset-based expense ratios on Fidelity 529 plans range from 0.10% to 0.95%. However, expense ratios on the Fidelity Index Portfolios range from just 0.13% to 0.14%, which compare very favorably to many other 529 plan options.

In addition, there are no enrollment fees or account maintenance fees, and there is no minimum to open a new account.

Fidelity Has a Long Track Record

Fidelity was established more than 75 years ago and over that time, has grown to be one of the largest brokerage firms with more than $5 trillion in assets under management. Fidelity has also been managing 529 plans for many years and its mutual funds have a long track record of performance. Over that time, the company has also been innovative in adapting to technology and new trends to make their products easier to use for their investors and clientele. 

Fidelity’s history demonstrates stability, an important factor for investors and especially college savers.

In addition, Saving For College rates Fidelity 529 plans highly. These annual ratings are based on numerous objective criteria we collect and analyze, including investment performance and plan features.

Are There Any Downsides to Choosing a Fidelity 529 Plan?

Funds from a Fidelity 529 plan can be used at colleges nationwide. However, if you do not reside in one of the states that offers Fidelity 529 plans, you may be giving up a state tax benefit if you choose to open an out-of-state plan.

You should see whether your state offers a state income tax deduction or credit and if it can be used with an out-of-state 529 plan. Over 30 states offer a tax benefit for 529 plan contributions; nine of these states provide this benefit for contributions to both in-state and out-of-state 529 plans.

Opening your home state’s plan may also have other benefits, so do your research.

How to Open a Fidelity 529 Plan Account

Steps to Opening a Fidelity 529 Plan

1. Research and Select a Plan: Begin by exploring the different 529 plans offered by Fidelity, considering state-specific benefits and investment options.

2. Open an Account: Click the Enroll Now button on Saving For College or go directly to the website for the Fidelity plan you want to open. You will need to know the child’s date of birth, social security number, and which investment choices you want. 

3. Fund Your Account: You can set up automatic contributions to make saving for college easier and possibly gain a state tax deduction and other tax benefits.

4. Manage Your Investments: Use Fidelity’s tools and resources to monitor and adjust your investments as needed.

Does it Make Sense to Open a Fidelity 529 Plan?

Fidelity’s 529 plans offer a robust combination of tax advantages, diverse investment options, and low fees, making them a compelling choice for education savings. 

Whether you are a current Fidelity customer or are new to their services, the benefits of these plans make them worth considering. Remember you should always check what your state offers before choosing an out-of-state plan to ensure you’re not giving up any potential benefits.

Most importantly, remember the best way to save more for college is to start early and save often, so get started today!