The Schwab 529 Education Savings Plan

The Schwab 529 Education Savings Plan gives you a choice of investment options, each designed to provide the appropriate balance of risk and growth to help meet your target investment goals. There is also a money market fund portfolio that is designed to offer the stability of capital for a shorter-term time horizon. You can change your portfolio selection twice per calendar year as authorized by the IRS.

Start by selecting a static portfolio or an age-based option.

• Static portfolios. You can select from a range of portfolios based on your investment objectives, risk tolerance, and time horizon. Your investment will remain within the selected portfolio until you change it.
• Age-based tracks. This approach allows you to pick a risk track that automatically adjusts itself over the life of your investment. When you select an age-based track, your investment gradually becomes more conservative as the beneficiary approaches college.

Within these portfolios, you have the option of choosing the type of fund – actively managed or index – that best accommodates your investment objectives.

• Actively managed funds. Broad exposure to up to thirteen professionally managed mutual funds that offer different investments and risks, each with the potential to exceed market expectations.
• Index funds. By investing across six index mutual funds, these diversified portfolios provide a cost-effective opportunity to track the performance of major market indices.

Decide which options will work best for you:

Read more about these portfolios and how they work in the Schwab 529 Education Savings Plan Brochure.

Learn more about the plan's investment performance:

• Schwab 529 Monthly Report
• Schwab 529 Quarterly Report
• Schwab Annual Report

The Schwab 529 Education Savings Plan portfolio composition – Each of the 529 Plan portfolios includes fund families primarily within Schwab's Mutual Fund OneSource^® service, as well as Schwab Affiliate Funds. The Schwab 529 Plan employs multiple fund families to diversify across securities, industry sectors, and investment styles.

Underlying Holdings of the Schwab 529 Education Savings Plan Portfolios

The Schwab 529 Education Savings Plan offers several portfolios that use a variety of highly rated, professionally managed investments from the following fund companies:
 

• American Beacon Funds
• American Century Investments^®
• Avantis^®
• Baird Funds
• JP Morgan Funds 
• Schwab Funds^®
• Metropolitan West Asset Management
• Vanguard Funds

Schwab 529 clients can make contributions, change investment portfolio selections (twice per calendar year as authorized by the IRS), take withdrawals, and change beneficiaries—as well as perform other account maintenance. Forms are available at schwab.com/forms by selecting the "Topics" Tab and then the "College and Custodial Accounts" option.

To transfer money from your bank account to your 529 account:

1. Log in to your Schwab 529 or Learning Quest 529 account.
2. Click the Contribution link.
3. Follow the instructions provided.

To transfer money from your Schwab brokerage account to your 529 account:

1. Log in to your Schwab brokerage account.
2. Choose your Schwab 529 or Learning Quest account.
3. Click the Contribution link.
4. Follow the instructions provided. This process requires your 10-digit brokerage checking number.
5. If you do not have a checking feature on your Schwab brokerage account, you must link that account to your 529 using the 529 Money Link form.

Contributions may also be set up through a contributor's checking account Billpay system using the 529 account number and this address:

Schwab 529 Plan
PO Box 2906
Shawnee Mission, KS 66201-2906

Need assistance? Call the 529 team at 888-903-3863.

While most states offer some type of 529 plan, there's no requirement that you pick your own state's plan. It's important to compare plans and make note of their differences. Some states, such as California, do not currently offer income tax deductions for plan contributions. In this case, other states' plans may have lower costs or more attractive investment features. Please consult your tax advisor for more information on which 529 investment makes the most sense for the state in which you reside.

Keep in mind that your child doesn't have to go to school in the same state where his or her plan was established; the full value of the account can be used at any accredited college or university in the U.S. While certain 529 plans may restrict using the funds out of the state, you can use funds from the Schwab 529 Education Savings Plan in any state.

You can either name a new beneficiary for the account or withdraw the funds. If you name a new beneficiary, he or she must be an eligible family member of the current beneficiary (e.g., a brother, sister, son, or daughter) to keep the tax benefits. Potential gift taxes or federal generation-skipping taxes may also apply.

If you choose to withdraw the funds from the account for nonqualified expenses, the earnings portion of a nonqualified withdrawal is subject to federal and state income tax and a 10% penalty. State tax treatment of earnings may vary. If the beneficiary receives a scholarship for qualified education expenses, dies, or becomes disabled, you may request a penalty-free withdrawal. In these situations, the account may still be taxed on the earnings portion of the withdrawals. Please consult your tax advisor to discuss your individual situation.

Starting in 2024, you can roll unused 529 assets—up to a lifetime limit of $35,000—into the account beneficiary's Roth IRA, without incurring the usual 10% penalty for nonqualified withdrawals or generating any taxable income. Please consult your tax advisor to discuss your individual situation.

Guidance from the U.S. Department of Education says that a 529 plan is counted as an asset of the parent or other account owner in determining eligibility for federal financial aid. Only 5.6% of the value of the account is considered the parent's assets for financial aid calculations. There is no impact if the account is owned by another relative, such as a grandparent, aunt, or uncle. When assets are held in the child's name, such as with a custodial account, only 20% of the assets will be considered. Schwab recommends that you consult your tax advisor concerning your particular situation.

You may be able to transfer all or part of a custodial account to the Schwab 529 College Savings Plan if you are the custodian for a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account. The transaction may be taxable, but any future earnings may grow tax-deferred. Because custodial assets are irrevocable gifts, the minor will be the 529 account owner and beneficiary, and you will be the responsible individual on the account. When the minor reaches legal adulthood (the age varies by state, but it's typically age 18), the minor will have full control of the account.