Saving for your child's education with a socially responsible 529 plan

Saving for your child’s education is usually one of the biggest expenses in your life. That’s why, at Amalgamated Bank, we provide access to banking and investment solutions to help your child pursue their learning journey. 

A 529 plan is one of the most popular options for education-focused investment accounts. These plans are tax-advantaged education savings vehicles governed by federal law. Each state's plan sponsors offer 529 plans with varying investment lineups, fees, and rules. As such, it is important to seek proper financial guidance to make investment decisions aligned with your goals and risk tolerance as you invest in your child's future. 

Flexibility for Education Expenses

Sarah Miller¹, a customer of Amalgamated’s Investment Services, prioritizes the plan. She shares, “I had been planning to open up a 529 savings plan for my daughter since I was pregnant with her.” 
Sarah stresses the importance of opening a 529 account: “Having a 529 plan makes me feel less worried about my daughter’s future. She adds, "Ironically, I’m just about to pay off my own student loans now (in my mid-forties). And now I’m basically trading out those monthly payments to set aside money for my daughter’s education. I truly hope that by the time she’s older, education is more affordable. But until then, having this investment account for her makes me feel responsible as a parent and better prepared for her future.”

What is a 529 Plan?²

529 plans may fall into the education savings or prepaid tuition plan categories. The 529 savings plan is a personal investment account that works like a 401(k) plan. Similarly, contributions into the account fund various investment portfolios. However, 529 monies can go directly toward funding a beneficiary’s K-12 or college tuition fees. Some states offer prepaid college 529 plans, enabling parents to fund their child's future education at current price rates, providing a buffer against rising tuition costs. Account holders may choose to transfer plans to other family members, including, but not limited to siblings and first cousins. 

Tax Advantages of 529 Plans³

529 plan benefits offer unique financial advantages, unmatched by other types of education savings accounts.  A 529 plan offers several tax advantages and easy account management, which include the following:
•    Portable plans that enable account holders to conveniently switch policies without residency obligations
•    High 529 plan contribution limits ensure that your child receives the finances needed to fulfill their academic goals
•    Tax-deferred investment growth
•    Withdrawals may be federal tax-free when used for qualified education expenses
•    State tax benefits, including deductions, vary by state and individual circumstances

What Makes a 529 Plan Socially Responsible?

A 529 plan essentially allows you to advance your child's education through investments that are aligned with your values. Socially responsible portfolios vary based on an individual's risk tolerance, contribution limits, and investment time horizon. For example, an account holder might contribute toward environmental, social, and governance (ESG) initiatives such as mitigating the effects of climate change. Other socially responsible 529 investments include initiatives that strengthen communities, inspire mission-driven change, and give back to society. Not every state offers socially responsible investments in their fund lineup, making plan selection an important consideration that an Amalgamated Investment Services advisor can assist you with.

Socially responsible investing strategies and criteria vary, and there is no standard definition. Investment outcomes and impact may differ.

Aligning Your Investments with Your Values

Anyone can open a 529 account regardless of their income or whether they are a parent. Amalgamated Investment Services provides access to various 529 plans to suit your needs, based on investment options, manager performance, and other considerations. Federal rules enable transfers between different 529 accounts without penalties or income tax once a year. This allows account holders to conveniently switch plans if they move to another state. 

Sarah shares the struggles in her search for a 529 account: “I discovered there were no socially responsible 529 plan investment options sponsored by the state I was living in. I remember contacting state offices and asking for a socially responsible plan, and they had no idea what I was talking about." 

Sarah eventually contacted Amalgamated Investment Services. “I reached out to my advisor, and within one business day, he set up a call to walk me through my options to help me find a plan that met my needs and also adhered to my values.”

How Amalgamated Investment Services Supports Your Goals

The Amalgamated Investment Services team can guide you through various 529 plans, explaining the pros and cons and identifying their suitability according to your goals. By doing so, you can support your long-term financial objectives for your child’s learning journey. For instance, an advisor might recommend an age-based portfolio that adjusts investment priorities and savings as a child approaches college age.
Sarah shares, “It actually blows my mind that there is not a ready-made option among state-sponsored 529 savings plans that divests from organizations that are doing things that are detrimental to the environment. If ever there is a time that we should be socially responsible when investing, it should be in the plans for our children and our children’s future."

Get Started with a 529 Plan

Amalgamated Investment Services can help you discover the best 529 plan to achieve meaningful savings as you navigate other costly areas of your child’s education. These help free up the funds required in areas such as campus lodging, learning materials, and supplies. We also help clients seamlessly integrate their 529 investments into their overall financial plan.

Reach out to Amalgamated Investment Services today to learn more about 529 plans.