Florida 529 College Savings Plan Review
Kim Finkle, MBA, Financial Advisor
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Florida is the third most populated state in the USA that is also seeing a large influx of younger couples. The cost of living in Florida is lower than in California and Newyork, but the cost of education is at par with the nation. Luckily, Florida offers two 529 college saving plans - Florida Prepaid and Florida Savings. In this post, we discuss the pros and cons of each and compare them with plans from some other states. We will also evaluate which one makes more sense for the children of divorced and separated parents.
How Do Florida 529 Plans Work?
Florida Prepaid plan is similar to Washington State's GET plan. You can pre-purchase college credits that your child can use to get a 2-year, 4-year, Graduate, Professional or Vocational education. It guarantees pre-paid education at any public college and university in Florida. The plan can also pay partially for an out-of-state school or a private college.
Florida Savings plan is Similar to California's ScholarShare. Unlike the Florida Prepaid plan, you can decide how much to contribute. You can either invest a total of $418,000 in this plan or combine it with the Florida Prepaid plan to reach the amount.
Both can be used to pay for books, tuition, and other education expenses.
Enrollment Requirement
A U.S. citizen or resident can open an account and designate a beneficiary. For both plans, either the plan purchaser or the student must be a Florida resident. If either of them moves out of Florida, they can still contribute.
Educational Programs Funded By Florida 529
- K-12 School - Florida Savings plan can be used to pay the tuition for a public, private, or religious K-12 school. Florida Prepaid plan is better suited for a college education.
- Apprenticeship - Florida Savings plan can be used to pay for an apprenticeship with in-class training.
- Vocational School - Both plans can be used to attend a vocational school.
- Graduate and Undergraduate College - Both plans can pay for qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at any college or university in the U.S. as well as some international schools.
Benefits of Florida 529
- Flexibility - Parents can join either or both of the plans depending on their financial needs and their child's education plan. If the student decides not to go to college, both can be cashed out or transferred.
- Gift Contributions - Family and friends can also contribute to the plan. A married couple can take advantage of five years' worth of federal tax-free gifts at one time and contribute $150,000. For single, divorced, and separated parents, the limit is $75,000 per person.
- Tax-Deferred - All earnings on the plans are tax-deferred. Florida Prepaid plan doesn't have any federal or state taxes unless the money is withdrawn.
- Scholarship Withdrawal - If the student receives a scholarship, the money can be used for other educational expenses.
- Federal Tax Exemption - All qualified distributions for up to $10,000 per student per year are exempt from federal income tax.
- Supports in-state and out-of-state schools - You can use your savings for schools inside Arkansas or outside.
- Rollover - You can also roll over from another state's plan.
How to Enroll
- You can enroll by going to the Florida Prepaid website.
Criticism for Florida 529 Plans
- Since the Florida Savings plan mainly invests in the stock market, the plan beneficiary may not have enough funds due to the market fluctuations.
- Florida Prepaid covers only books and tuition.
- Some distributions may be taxable.
- It gives an unfair advantage to the rich since they can save faster.
- The plans do not take Florida's rising cost of living into consideration.
Co-parents and Florida 529 Plans
Both plans can be a good option for divorced and separated parents residing in and out of the state. However, plans from other states, such as California, offer bigger savings than the Florida Savings plan.
Since co-parents have separate finances and only one person can start a Florida 529 plan, both parents can start one separately for the same child, and fund half of the balance. This way, if the child decides not to attend college or they need to withdraw funds for some other reason, or assign a different beneficiary for their portion, they can do so easily. Alternately, one parent can fund the entire plan and the other one can reimburse them for their half. Another option is that they can start 529 plans in different states and fund half each.
Comparison With Other 529 Plans
Feature |
Arizona |
California |
Florida |
Max Contribution |
$519,000 |
$529,000
|
$415,000 /
Full Tuition
|
Full In-state Tuition |
Yes |
Yes |
Yes |
Full Out-of-state Tuition |
Yes |
Yes |
Savings Plan Only |
State Tax Exemption |
Yes |
Yes |
No |
Federal Tax Exemption |
Yes |
Yes |
Yes |
Primary Contributors |
Anyone |
Anyone |
Anyone |
Student Loan Repayment Option |
Yes |
Yes |
Yes |
Plan Review |
Link |
Link |
|
Related:
What is a 529 Plan?
529 Plans By State
1. Alaska 529 Plan
2. Alabama 529 Plan
3. Arizona 529 Plan
4. Arkansas 529 Plan
5. California 529 Plan
6. Colorado 529 Plan
7. Connecticut 529 Plan
8. Delaware 529 Plan
9. Florida 529 Plan
10. Georgia 529 Plan
11. Hawaii 529 Plan
12. Idaho 529 Plan
13. Illinois 529 Plan
14. Indiana 529 Plan
15. Iowa 529 Plan
16. Kansas 529 Plan
17. Kentucky 529 Plan
18. Louisiana 529 Plan
19. Maine 529 Plan
20. Maryland 529 Plan
21. Massachusetts 529 Plan
22. Michigan 529 Plan
23. Minnesota 529 Plan
24. Mississippi 529 Plan
25. Missouri 529 Plan
26. Montana 529 Plan
27. Nebraska 529 Plan
28. Nevada 529 Plan
29. New Hampshire 529 Plan
30. New Jersey 529 Plan
31. New Mexico 529 Plan
32. New York 529 Plan
33. North Carolina 529 Plan
34. North Dakota 529 Plan
35. Ohio 529 Plan
36. Oklahoma 529 Plan
37. Oregon 529 Plan
38. Pennsylvania 529 Plan
39. Rhode Island 529 Plan
40. South Carolina 529 Plan
41. South Dakota 529 Plan
42. Tennessee 529 Plan
43. Texas 529 Plan
44. Utah 529 Plan
45. Vermont 529 Plan
46. Virginia 529 Plan
47. Washington 529 Plan
48. West Virginia 529 Plan
49. Wisconsin 529 Plan
50. Wyoming 529 Plan
51. DC 529 Plan
Warning:
This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.