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Frequently Asked Questions

For any questions related to your 529 account, please contact your 529 Program.

Because money you contribute to a 529 plan grows without any taxes, and if you eventually withdraw the money to pay for qualified school costs, there is no tax on any investment gains. That can be a fantastic deal.

529s can be used flexibly across a wide range of qualified school expenses. 529 plans can be used for private K-12 and for whatever comes after high school, which includes vocational trade, technical and specialty schools, apprenticeships, community colleges, certificate programs, four-year universities and colleges, graduate school, law school, and med school.

Hadley humanizes the process for you to find your top-rated plan. The right 529 plan should maximize your tax benefits, have low fees, and have an investment mix that matches your own personal savings style and timeline on when you anticipate using the funds.

Don’t know your own personal style? No sweat. We humanize the process for you, asking the same questions found both on 529 Program websites and nearly every financial advisors’ playbook when talking with new clients, but using words you can actually understand (and might even enjoy) answering and without paying needlessly high excessive advisory fees.

In just a matter of minutes, Hadley finds the 529 plan right for you, for free.

  • Enrollment fees
  • Tuition
  • Certain room and board (on-campus)
  • Certain rent, food, and utility bills (off-campus)
  • K-12 tuition ($10,000 max limit per calendar year)
  • Special needs expenses
  • Computers, software, internet access
  • Qualified education loan payments (lifetime maximum of $10,000 per designated beneficiary or sibling of designated beneficiary)
  • Fees, books, equipment, and supplied for participation in a registered and certified apprenticeship program
  • For college students, 529 plans can be used to pay for study abroad and other summer programs offered for credit through an eligible college or university.
  • Nonqualified expenses: travel expenses, college test prep, health insurance, personal living expenses, college entrance exam fees, fees for sports or club activities; summer camp or enrichment classes outside of school

Every 529 Plan has a state that sponsors it. Americans can enroll in 529 Plans sponsored by other states. In fact, the majority of Americans have no incentive to enroll in the 529 Plan sponsored by their own state, but some do.

We know it can be a maze of confusion, and that’s why Hadley exists: we stamp out the stress and make it easy to find your most top-rated plan that maximizes your tax benefits and that aligns with your personal savings style.

Hadley uses the 529 Plan ratings issued by Morningstar, an independent investment research firm. Morningstar rates 529 Plans, identifying the country’s “best-in-class” plans based on the 529 Plan’s fees, plan options, customer service, and program and state board oversight.

Hadley routes users, for free, to top-rated 529 Plans that maximize users’ federal and, if applicable, state tax benefits. Not all Americans receive state tax benefits for contributing to 529 Plans.

Some 529 Programs require zero minimums to get started, but some do. Hadley shows your minimum initial contribution–if there’s even a minimum to begin with– you’ll need to make to get started.

There are no minimums that you need to contribute each year; in fact, we encourage you to invite friends and family members to make gifted contributions to your account to lessen your own financial burden.

Individuals can contribute up to $17,000 ($34,000 for married couples) to anyone’s 529 account without incurring the gift tax (this figure is subject to change from year to year) and will not be counted against the donor’s lifetime gift and estate tax exemption.

Contributors can further maximize federal tax benefits and superfund 529 accounts up to 5 years’ in advance with a maximum single contribution of $85,000 for individuals ($170,000 for married couples). It can be a great way to jumpstart a child's or grandchild's education savings with the added benefit of reducing the contributor’s taxable estate. Because the contributions made to 529 plans generate tax-free compounding, a large upfront deposit can generate much greater earnings over time.

Connecting with friends and family members is super easy on Hadley. Search for friends or family members by name, phone number, or email address. Send friend requests to connect with fellow parent friends. Setting up recurring contributions is super easy so you never miss your niece’s birthday ever again.

529 Plan fees are calculated using “expense ratios.” The amount you pay in annual fees to the 529 Plan equals your expense ratio multiplied by your account balance. So if your expense ratio is 0.20% and your account balance has $10,000, then you pay $20 in fees. Hadley does not receive any Plan fees–these fees go to the 529 Plan. Hadley recommends plans with low expense ratios from top-rated 529 Program lineups that’s right for you.

It may not sound like a lot, but lower fees mean more money can be retained in your investment account that will ultimately be compounded tax-free year-over-year-over-year, amounting to significant extra earnings potential. Hadley has curated the choices of every single 529 Plan to make it easier to match you to a top-rated 529 Program with a low expense ratio that aligns to your personal savings style and time horizon.

Hadley is a public benefit registered investment advisor that does not charge investment advisory fees or monthly subscription fees. We exist to make higher education an affordable and accessible reality for all Americans.

To cover the costs Hadley pays to move funds from users’ bank accounts to their or others’ 529 accounts, there is a processing fee for each transaction completed via Hadley, which ranges from $1.49 for contributions under $150 to a $20 cap for contributions over $2,000. Hadley routes all Americans, for free, to their most advantageous 529 Plan and makes it as easy as possible for anyone to contribute to anyone else’s 529 plan at the tap of a phone screen.

Contribution Amount Nominal Processing Fee
$0-$150 $1.49
$150-$2000 1%
$2000+ $20

Unlike traditional Corporations whose primary interest is maximizing shareholder value, public benefit companies exist to advance its stated public benefit goal. Hadley’s specific public benefit is to make education a more accessible and affordable reality for all Americans.

If your kid scores a scholarship, you can take out that amount out of your 529 plan completely penalty-free, but you’d have to pay income tax. That said, that money enjoyed tax-free compounded growth in those intermediary years, so this can be a fantastic deal since a regular investment account incurs annual taxes on dividend and interest income even in unrealized investment gains, limiting its growth compounding potential. Just make sure to keep your scholarship documentation if the IRS comes knocking on your door for an audit.

If your kid doesn’t go to college, keep in mind that your child can also use the funds at any time (there’s no age or income limit around using 529 funds), and they can be used at vocational / technical schools, community colleges, certificate programs from accredited bodies, computers, extension classes, art supplies, books, student loans, and private K-12 tuition to name a few qualified education expenses.

If your kid doesn’t use the 529 funds at all, the funds can be transferred penalty- and tax-free to another member of the family.

Unused 529 funds can rollover into the beneficiary’s Roth IRA (up to $35,000 per beneficiary, but this lifetime beneficiary maximum of $35,000 may increase in the future). Any American can take advantage of this, and there are no income or age limits when it comes to opening and contributing to a 529 account.

Yes, even a parent can open a 529 account and later roll the funds into their Roth, even if they earn above the Roth IRA income limit. To take advantage of this 529-to-Roth conversion, the 529 account must be opened for at least 15 years.

You can transfer any leftover money to another family member’s education, including your own, or save the funds in case of future enrollment in grad school.

You can also keep it in the 529s to keep investing for the next generation’s education costs.

You can also rollover the leftover funds into an ABLE account if the beneficiary’s disability had been documented by age 26.

If funds are used for non-qualified expenses, there is a 10% penalty and income tax on earnings. The penalty only applies to the earnings portion, not the amount you contributed.

For example, if your contribution of $5,000 grew to $20,000, and let’s say you withdraw $10,000 to pay for a credit card bill, which is a non-qualified expense for 529 plans. Here’s the penalty: In your overall account balance, because your contribution makes up 25% of the balance, that means your earnings portion represents 75% of your balance. Therefore, the earnings portion of your non-qualified $10,000 withdrawal is therefore $7,500. The penalty you pay is 10% of the earnings portion, so in this case, it would be $750. You then pay your ordinary income tax rate on just the $7,500, not the overall $10,000.

Keep in mind: in the intermediary years your 529 account balance enjoyed tax-free, compounded growth, meaning it was growing free of taxes on its investment gains.

Any 529 plan with less than $10,000 in it will not be counted toward your expected family contribution (EFC) at all, so it will not impact financial awards given through FAFSA. Above that amount, only 5.64% of the balance in your 529 plan will count toward your expected family contribution – a tiny portion by any measure. By contrast, 50% of the balance in a custodial account (UGMA/UTMA) will be deducted from your total financial aid award.

This is another reason why 529 Plans, which enjoy tax-free compounded growth, are preferable to UTMA/UGMA accounts when it comes to saving for education and minimizing your savings’ impact on financial aid awards.

For new users, Hadley recommends top-rated plans and views state tax benefits as potentially very material that can then be reinvested to get your education savings that extra boost. Hadley has gone the extra mile for you and has curated the choices of each and every 529 Plan menu to match users to low-cost plans that align to their own personal style and time horizon. If you are eligible for a state tax benefit, Hadley helps you keep track of your contribution to maximize your state tax benefit, if you have one.

Yes! Not all states offer Prepaid plans, so this question doesn’t pertain to everyone. The country’s biggest prepaid program is Florida’s Prepaid program. 529 Plans are the perfect complement to Prepaid Plans, and here’s why:

A 529 Plan is a super handy supplement to your Prepaid Plan because you can use the money in your 529 account for more flexible items, such as books, computers, graduate school, trade school, vocational technical school, accredited certification programs, off-campus housing, art supplies, and so on. In the event you want to go out-of-state public or in-state private, 529 funds will come in especially handy to save the day, as Prepaid accounts can only be used for in-state public school.

With Hadley, you can receive birthday and holiday gifts into your 529 Plan on Hadley that grow hand-in-hand next to your Prepaid Plan.

Whereas a Prepaid Plan is a contractual agreement that often restrict plan holders to attend in-state public schools only, a 529 Plan is an investment account that travels wherever you are and can be used at an incredibly large range for education-related expenses, including in-state and out-of-state public or private education and also for books, computers, art supplies, and off-campus housing. 529 funds can also be used for other types of schooling, like vocational and technical training, and have no age or income restrictions.

At any point in time – including before your child has entered or finished school – you can withdraw funds from your 529 plan for any reason; however, there may be a penalty for doing so. If earnings from the account are used to cover a non-qualified expense (such as paying a credit card bill, buying a car, etc.), then expect to be hit with federal (and possibly state) income taxes in addition to a 10% penalty.

You cannot transfer funds from a 401(k) or IRA into a 529 plan. Any distribution you take from your retirement plan for the purpose of depositing it into a 529 plan will be taxed and may also be subject to an early withdrawal penalty.

Yes! You can have as many 529 accounts opened in as many states that sponsor 529 Programs. Remember: Americans can enroll in 529 Programs sponsored by other states.

If you have a 529 account already, but want to open and link a new account that might have a better rating or might qualify you for new state-level tax benefits, that works, too. Hadley makes it easy for families to open a new 529 account for family members and friends to directly contribute into their accounts, without requiring parents to make an immediate rollover.

If you want to rollover your existing 529 account to your new one, simply contact your old 529 Program’s customer service and they will handily walk you through the rollover process (takes about 15 minutes).

An ABLE account, also called a 529A account, allows individuals with disabilities and their families a tax-advantaged way to save money for disability-related expenses of the account’s designated beneficiary.

Earnings in an ABLE account grow tax-deferred, and withdrawals are tax-free when used for qualified disability-related expenses, including, but not limited to, education, housing, transportation, assistive technology, employment training and support, financial management and health care expenses. Money in an ABLE account can be used over the lifetime of the beneficiary so long as funds are used for qualified expenses.

In general, individuals are eligible for an ABLE account if they are already receiving benefits under Supplemental Security Income (SSI) and/or Social Security Disability Insurance (SSDI). If not, they may still be eligible if they certify that they are blind or disabled and have a written diagnosis of their condition by a licensed physician. Under all circumstances, the onset of the disability must have begun prior to age 26.

The first $100,000 saved in the account is exempted from the Supplemental Security Income $2,000 limit (beneficiaries will still receive Medicaid if the account exceeds $100,000). Check with the state that administers your ABLE account for additional details related to this exemption, and whether it applies to your situation.

Hadley is compatible with 529 ABLE Programs and is committed to helping the Ability Community more easily access 529 ABLE Plans. If you have a 529 ABLE plan already, select the 529 ABLE Program you are enrolled in, type in your account number, and connect with family and friends to start receiving gifts directly into your 529 ABLE account.

Yes, 529 plan assets are exempt from the federal estate tax. For context, in 2022, estates worth over $12.06 million are subject to federal estate taxes, but these assets are exempt from federal estate tax. Contributions to a 529 plan are treated as completed gifts for tax purposes and are immediately removed from the donor’s estate. These figures and thresholds are subject to change from year to year.

Please download the Hadley app to receive your free 529 plan recommendation. The material contained on this website is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with her or her financial professionals. Past performance is no guarantee of future results. There can be no assurance that any investment will achieve its objectives or avoid substantial losses.

All research and other information provided on this website has been prepared for informational purposes only and Hadley Investment Co. assumes no liability or responsibility for any errors or omissions in the content of this website or any linked website.