What Is NextGen 529?
NextGen 529 is Maine’s Section 529 plan. A great way to help your child save for college is to open and contribute to a NextGen 529 account. Getting started today will open doors for them later — whether they choose to attend trade school, a two-year college, or even a four-year college. Once an account is open, anyone can make contributions.
Learn how to open a NextGen 529 account at NextGenforME.com:
Benefits of NextGen 529
By opening a NextGen 529 account, you’ll enjoy a variety of benefits. Just take a look.
Grants for Maine Residents
Grants for opening a NextGen 529 account and for making additional contributions are real investments in the future. Grants are available for accounts owned by a Maine resident or for the benefit of a Maine resident, and are limited to one per beneficiary/student.1
Reduce Student Loans and Debt
When used for qualified higher education expenses, every dollar in a NextGen 529 account is a dollar that doesn’t need to be borrowed and repaid with interest.*
*This hypothetical investment example illustrates the potential value of regular $100 monthly investments over 15 years and assumes a $25 initial contribution and an average annual return of 5%. These examples do not reflect actual investments and do not reflect any fees or expenses. Investment performance is not guaranteed. Investments may lose value.
This hypothetical borrowing example illustrates the potential cost of borrowing $18,000, repaying over 15 years, and assumes an interest rate of 4%.
Any earnings have the opportunity to grow free from federal (and possibly state) income tax. Withdrawals, including any earnings, are federal-tax-free when withdrawn to pay for qualified higher education expenses.2 Contributions are not deductible for federal income tax purposes. These tax benefits can help maximize your contributions to your 529 account.
Multiple Investment Choices
NextGen 529 offers multiple investment choices that can help meet your college-planning needs.
Age-Based Diversified Portfolios
These portfolios provide an investment strategy that varies based on the age of the child. Funds are invested most aggressively when the child is young and are automatically shifted to a more conservative approach as the child approaches college age.
These portfolios have specific investment objectives, such as growth or income.
These portfolios invest in one underlying mutual or exchange-traded fund, allowing allocation based on the underlying fund’s range of investments.
Stable Principal Portfolios
The Principal Plus Portfolio is currently invested in only a guaranteed interest account, although it may also invest in corporate fixed-income investments and/or similar instruments.
The NextGen Savings Portfolio is comprised exclusively of deposits in an interest-bearing, FDIC-insured bank account.
Parents, grandparents or even family friends can open a NextGen 529 account. You can even open a NextGen 529 account for yourself and pursue your own postsecondary education!
NextGen 529 offers multiple investment choices. You can change your existing investment allocations twice per calendar year and upon a change of beneficiary. You can change the allocation of future contributions at any time.
Assets in a NextGen 529 account may be used at any U.S.-accredited postsecondary institution. Accredited institutions are those eligible to participate in federal financial aid programs, and include some foreign institutions.
You can also use up to $10,000 per year from your 529 account for the same beneficiary for elementary or secondary public, private or religious school tuition.
For distributions starting in 2019, qualified expenses also include (1) expenses for fees, books, supplies, and equipment required for the participation of a beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act; and (2) amounts paid as principal or interest on any qualified education loans of either the beneficiary or sibling of the beneficiary, up to a lifetime maximum of $10,000 per individual.
You can make contributions of as little as $25 a month and currently up to as much as $520,000 for all NextGen 529 accounts for the same beneficiary. Anyone may make contributions to your NextGen 529 account — parents, grandparents, friends or family.
Make It Easy with Automatic Contributions
Once you open a NextGen 529 account, you can arrange to have contributions made to your account automatically from a checking or savings account, or through payroll deduction. Check with your employer to find out if they can process payroll direct deposits.
Account Owner Control
With a NextGen 529 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. Please note that special rules apply to accounts established by UGMA/UTMA custodians.
Gifting and Estate-Planning Benefits
A contribution to a 529 plan account is treated as a completed gift from the donor to the designated beneficiary of the account and qualifies for the annual federal gift tax exclusion of $17,000 ($34,000 for married couples filing jointly), per beneficiary. This affords a unique opportunity in which you can remove assets from your taxable estate while contributing to an account that you control. You may also be able to take advantage of a federal gift tax election that applies only to 529 plan contributions. This election allows a lump-sum contribution of up to $85,000 ($170,000 for married couples filing jointly), which is five times the annual exclusion amount, per beneficiary, in one year and treats the contribution as if it was made ratably over five years. This gifting strategy may be an attractive option for grandparents wishing to help fund college for one or more grandchildren.3
Please remember that there’s always the potential of losing money when you invest in securities.
1Grants for Maine residents are linked to eligible Maine accounts. Upon withdrawal, grants are paid only to institutions of higher education. See Terms and Conditions of Maine Grant Programs for other conditions and restrictions that apply. Grants may lose value.
2To 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 Section 529 of the Internal Revenue Code. Any earnings withdrawn that are not used for qualified higher education 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. State tax treatment of distributions for certain qualified higher education expenses may differ. Please consult your tax advisor for specific advice regarding such distributions.
3If you make the five-year election to prorate a lump-sum contribution that exceeds the annual federal gift tax exclusion amount and you die before the end of the five-year period, the amounts allocated to the years after your death will be included in your gross estate for tax purposes. Please note that when making a contribution to a 529 account (whether for a single year or using the special election to prorate the gift over five years), all other gifts you make to a particular beneficiary are included in determining the available annual gift exclusion amount. Please consult your tax and/or legal advisor for specific guidance before making investment decisions that could affect your taxes or estate or Medicaid planning needs.
NextGen 529 is a Section 529 plan administered by the Finance Authority of Maine (FAME). You may obtain the NextGen 529 Program Description by requesting a copy from your financial professional, visiting NextGenforME.com or calling the program manager at 1-833-336-4529. The Program Description should be read carefully before investing.
The Program Description contains more complete information, including investment objectives, charges, expenses and risks of investing in NextGen 529, which you should carefully consider before investing. If you are not a Maine resident, you also should consider whether your or your designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s 529 plan.
NextGen 529 accounts are not bank deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC). Returns on investments in NextGen 529 accounts are not guaranteed or insured by the State of Maine, FAME or any NextGen 529 service providers. NextGen 529 participants assume all investment risk of an investment in NextGen 529, including the potential loss of principal and liability for tax penalties that are assessable in connection with certain types of withdrawals of amounts invested in NextGen 529.
Vestwell State Savings, LLC is the program manager, The Bank of New York Mellon is the program custodian, BlackRock Advisors, LLC is the program investment manager, and BlackRock Investments, LLC, Member FINRA, is the program distributor and underwriter.