529 plans are designed to provide:
- Tax advantages
- A choice of investments
Why use a 529 plan?
College costs—and student debt—are on the rise. A 529 plan may help you save more for college than traditional savings vehicles. See how much you could save. What's more, you can use your 529 account to pay for tuition, up to $10,000, for children in kindergarten through grade 12.¹
College costs have risen faster than other expenses2
Changes in Consumer Price Index components, indexed to 100 in 1982–1984
- Your money is invested, it can accumulate and grow tax free,3 and can potentially grow over time. That means that you may have more when it's time for your child to go to school.
- 529 plans have no income, age, or state residency requirements.
- Unlike UGMA/UTMA accounts, you retain control over your 529 account.
- You can take advantage of special gifting flexibility, including lump sum contributions of up to $80,000 for singles, and $160,000 for couples filing jointly per beneficiary without triggering federal gift taxes.4
- A 529 plan can work in concert with financial aid. Explore options with our financial aid estimator.
- Thinking about a loan or already have one? Check out our student loan repayment calculator.
John Hancock Freedom 529 plan offers additional benefits
- It’s easy to get started. You can open a 529 plan with as little as $250 and each account can accept up to $475,000 per beneficiary.5
- You may be eligible for in-state tuition at the University of Alaska.6
How 529 plans work
Designed for educational goals
A 529 plan is a tax-advantaged savings account designed to help you invest for your child's educational needs. 529 plans are sponsored by states, state agencies, or educational institutions and used by parents and grandparents to pay for a child’s education. You can also use them to fund your own education.
An easy way to save
You can open a 529 plan with as little as $250. Other individuals, including family members and friends, can make gifts into your account. Most plans allow you to make regular, automatic contributions right from your bank account. Remember, the sooner you start saving, the quicker you can take advantage of tax-free growth. See what the cost of waiting can do to your goals.
Flexible and easy to use
The funds in a 529 plan can be used to pay for qualified college expenses, such as tuition, fees, room and board, textbooks, and computers. (They don't cover things such as bedding, decorations, or food.) For primary and secondary schools, up to $10,000 can be used to pay for tuition expenses.¹
You retain control
Life happens. If your child doesn't need all of the funds or receives a scholarship, you can switch the beneficiary to another family member. You can also withdraw the money to use for nonqualified expenses, although you'll pay taxes and penalties.
529 plans offer significant tax advantages
529 contributions grow federal tax free. As long as it’s used for qualified expenses, your money isn’t taxed when withdrawn. Many states also offer a full or partial tax deduction or credit for your contributions.8 That’s extra money you’ll have for school. Use our state tax calculator to learn more.
The tax advantage of a 529 plan can make a big difference over the long run
$500 monthly contributions in hypothetical accounts growing at a rate of 6%
This example assumes contributions of $500 per month, a hypothetical 6% nominal rate of return compounded monthly, and a 28% tax bracket for the taxable account. The returns shown are for illustrative purposes only. They are not representative of any particular investment and are not intended to predict the return of any investment, which will fluctuate. Capital gains, exemptions, deductions, and local taxes are not reflected. Investors should consider their personal investment horizon and income-tax brackets when making an investment decision.
Using our time-tested, multimanager approach
At John Hancock Investment Management, we bring our multimanager approach to the John Hancock Freedom 529 plan. That means our plan design combines multiple investment strategies from multiple managers in a single portfolio. The result is greater diversification, backed by the oversight of three leading organizations: the Education Trust of Alaska, John Hancock Investment Management, and T. Rowe Price. This unique partnership offers a level of investment oversight that many other 529 plans can’t match.
1 Some states don't consider withdrawals from a 529 plan to pay for primary or secondary school costs a permissible expense. The tax consequences of such payments will vary depending on state law and may include penalties. Please consult with a tax or legal professional.
2 The Bureau of Labor Statistics, John Hancock Investment Management, 2021.
3 State laws and treatment may vary. Earnings on nonqualified distributions will be subjected to a 10% federal penalty tax. Please speak with your tax professional for more information.
4 For 2022. The donor must elect that the gift be treated as having occurred over a five-year period in order for it to qualify for the federal gift tax exclusion. If additional gifts are made to the same beneficiary during this five-year period, a federal gift tax may apply. If the donor dies within this five-year period, a pro rata share will be included in the donor's estate for federal estate tax purposes. State gift and estate tax laws may vary.
5 Contributions cannot cause the account balance to exceed $475,000 per beneficiary.
6 As a John Hancock Freedom 529 account holder or beneficiary, you may qualify for in-state tuition at the University of Alaska, regardless of the state you live in. To qualify, you need to hold your account for at least the two years immediately preceding enrollment. Please refer to the Plan Disclosure Document for more information.
7 Each account is designed to be protected from the claims by creditors of the account holder and beneficiary, with the exception of contributions made to accounts after being in default of child support obligations for 30 days. Please refer to the Plan Disclosure Document for more information.
8 Consult your financial, tax, or other professional to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances.
Investing involves risks, including the potential loss of principal. There are no guarantees that a fund's investment strategy will be successful or that education expenses will be met. Even if you contribute the maximum amount, there is no assurance that the money in your account will be sufficient to cover all the education expenses your Beneficiary may incur, or that the rate of return on your investment will match or exceed the rate at which education expenses may rise. The impact of inflation on education expenses is uncertain and could exceed the return on your investments in your Account. Please see the Plan Disclosure Document for additional risks.
Financial advisors: See how adding a 529 plan to your practice can help you take a more holistic approach to helping your clients pursue their financial goals.
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