You know about the benefits of saving for your child’s college expenses in a 529 plan. You’ve carefully budgeted and run the numbers for how much college will cost. Now, the time has come to fund a 529 account to start saving and investing this money.
There are four main ways you can contribute to a 529 account through American Funds:
- You can mail a check directly to American Funds.
- You use a FundsLink to contribute over the phone by calling American Funds at 800-421-4225.
- You can make a contribution online through American Funds’ website.
- Financial advisors, like Marotta Wealth Management, can assist you with making a 529 account contribution from a linked checking account. Therefore, if you are a client of ours, feel free to reach out to your advisor if you are interested in contributing to a 529 account under our management.
General Advice
American Funds requires online contributions to be between $50 and $10,000. Once the account balance (including earnings) reaches $550,000, additional contributions will not be permitted.
Investments can only be changed in 529 accounts twice per year, so it’s important to allocate your contribution correctly when it is made.
If you are working with a financial advisor, like Marotta Wealth Management, you can reach out to your advisor to find out how much of your contribution should be allocated towards each investment fund in order to keep your asset allocation on target.
Alternatively, you can review the current asset allocation on the latest account statement for your 529 account. It should show the percentage of the account’s assets that are in each investment fund. You can download the latest account statement by selecting the “Statements & Tax Forms” tab at the top of the Home page.
If quarterly rebalancing is set up on your 529 account, your contribution will be aligned towards your target asset allocation automatically when the next rebalance takes place in March, June, September, or December.
Consider reviewing the “Before you get started” page and Service & Support guide on the CollegeAmerica website for additional information. If you have any questions about the options described below, we recommend contacting American Funds directly at 800-421-4225.
1. You can mail a check directly to American Funds.
You can mail a check to American Funds to contribute to a 529 account. The check should be made payable to “CollegeAmerica” and include the 529 account number and beneficiary’s name in the memo line. The CollegeAmerica FAQ page also suggests you include the amount to invest per investment fund on the check itself or in an attached letter.
You can find the mailing address for the applicable CollegeAmerica service center for your state on their website here: Mailing Addresses.
As of the publication of this article, the mailing address for Virginia residents is:
COLLEGEAMERICA® / ABLEAMERICA℠
P.O. Box 2713
Norfolk, VA 23501-2713
2. You use a FundsLink to contribute over the phone.
If you have a FundsLink between your 529 plan and a bank account, then you can contribute to your account by calling American Funds directly at 800-421-4225. The customer service team can take your verbal instructions to initiate a recurring or one-time contribution from the linked account.
Unfortunately, they are not able to receive contributions from other sources like credit cards, cash movement apps, or unlinked accounts.
The American Funds customer service team for existing and prospective investors can be reached by phone at 800-421-4225. Their hours are advertised on their “Connect with us” page as 8:00 a.m. to 7:00 p.m. ET, Monday through Friday.
3. You can make a contribution online through American Funds’ website by setting up or using a FundsLink.
For making the contribution online, start by logging into your American Funds online account.
About halfway down on the page, you should see “Your Bank Information” on the right-hand side. Click “Set Up” under “For Online Investing.”
The next page will say “Add Bank Account” and provide fields for you to enter your bank account information. This is where you would enter the information for the bank account from which you would like to fund the 529 account. This can be skipped if you previously linked the desired bank account to your American Funds online account.
To make a one-time contribution:
After adding a bank account, go back to the “Your Portfolio” tab and click the magenta “Buy” button under the blue “VIEW TRANSACTIONS” button to make a one-time contribution.
In the “Amount to Buy” section on the next page, you should see fields next to each investment fund currently selected in your 529 account, as well as an empty field where you can select an additional investment fund that is not currently in your 529 account.
After you have entered the amount you would like to contribute towards each investment fund, check to make sure the applicable bank account is selected. Then, click the blue “NEXT” button at the bottom of the page.
Finally, review the transaction information on the next page, check the box to accept the banking terms and conditions, and click the blue “SUBMIT” button to complete the contribution.
To schedule a recurring contribution:
After adding a bank account, go back to the “Your Portfolio” tab and click the magenta “Automatic Transactions” button under the blue “VIEW TRANSACTIONS” button to schedule a recurring contribution.
On the “Your Portfolio: Automatic Transactions” page, select the blue “+ADD NEW” button in the “INVESTMENTS” section.
In the “AMOUNT TO BUY” section on the next page, you should see fields next to each investment fund currently selected in your 529 account.
After you have entered the amount you would like to contribute towards each investment fund, click the blue “NEXT” button at the bottom of the “AMOUNT TO BUY” section.
Next, schedule the frequency of your contribution. You can schedule contributions to occur monthly, quarterly, or on specific days / months of the year.
For a one-time contribution, select “Custom” under “Frequency” and enter the date you would like the contribution to occur. Make sure to select an “End Date” that is after the contribution date to ensure the contribution is not repeated.
Then, click the blue “NEXT” button at the bottom of the “SCHEDULE” section.
In the next section, select the bank account you added previously or click “ADD NEW BANK ACCOUNT” to set up a new account to make the contribution from. Then, click the blue “NEXT” button at the bottom of the “BANK INFORMATION” section.
You should see a summary of the information provided shown under “BUY SUMMARY” on the right-hand side. If this information is correct, click the blue “NEXT” button. Otherwise, click the “EDIT” button next to any section that needs revising.
Finally, review the setup information for the automatic investment transaction on the next page, check the box to accept the banking terms and conditions, and click the blue “SUBMIT” button to complete the contribution.
4. Financial advisors, like Marotta Wealth Management, can assist you with making a 529 account contribution from a linked checking account.
Our College Planning service is currently reserved for our Comprehensive and Collaborative service level clients. However, we offer 529 account management at all of our service levels.
As a part of our 529 Management service, we provide asset allocation design and ongoing investment management services for managing 529 accounts hosted at College America. We help our clients meet their college funding goals by designing age-specific portfolios in tax-efficient 529 college plans, setting the investment selections and rebalancing to those targets.
And as part of our College Planning service, we tailor our work to meet our client’s specific college savings goal. We then monitor each account to ensure savings and investments are on target to meet educational funding goals.
Conclusion
Regardless of which contribution method you choose, starting a college savings plan early is critical. Saving for college requires time and money. The more you have of each, the better. Time puts the miracle of compound interest on your side. And the more money that is earning money, the less you need to continue contributing. The earlier savings begin, the more manageable the monthly amount that should be saved.
Saving for college is an important part of financial planning, but saving for retirement is even more essential. You can borrow money for college but no one will loan you money for retirement. By default, we recommend prioritizing your own savings plan over your child’s college savings.
For many of our clients, it is the grandparents who are secure enough financially to be able to fund their grandchildren’s education. The added benefit of having a grandparent own a 529 plan is that these funds are not counted in the formula for financial aid.
Regardless of whether or not you are a client of our firm, we recommend utilizing 529 plans for your college funding goals. Here in Virginia, not only do you get a state tax deduction for contributions if you pay Virginia taxes, but the Virginia 529 plans are some of the best 529 plans in the country .
For more information on the CollegeAmerica and the Invest529 plans, visit Virginia529.com.
Image by Zen Chung on Pexels. Image has been cropped.
