Alaska 529 plan for investing in education

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(Jake Brasil)
Published: Feb. 17, 2021 at 6:26 PM AKST
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ANCHORAGE, Alaska (KTUU) - When the Permanent Fund Dividend application is filed out, applicants may have noticed an option to add half their dividend to an Alaska 529 account.

Alaska 529 is a state-sponsored way to invest money for education. Organizers say the earlier people start saving for their education, the better.

“It’s never, never too soon to start investing and our target group that we’re really trying to encourage to start investing is, babies to five years old,” says Lael Oldmixon of Alaska 529. “We’d really like to see that group work, work hard, 18 years is a long is actually a short horizon when you’re wanting to save for your goal. But the earlier you start, the more benefit potential you have the growth in those accounts.”

The investment vehicle allows individuals to create an account that is tax-free if it’s used for education. It can be used at any accredited college in the U.S. and some international schools, as well as K-12 tuition and vocational-technical programs. The money can also be used for costs associated with apprenticeships that are registered with the Alaska Department of Labor.

The dividend isn’t needed to start an account, one can be started from their website

“You can open an account online in minutes, for as little as $25,” says Oldmixon. “And so what we want is for that low, accessible point, we want it to be affordable for people and we want people to be able to, to get started easily. So we’ve created a very easy application that’s all electronic online. And so the $25 minimum and then we encourage people to contribute regularly to set up an automatic monthly contribution through a bank or to set it up annually with the PFD or through their employer, they can do payroll through direct deposit as well.”

She says a 529 plan can be started for someone else, so a grandparent can start one for a grandchild, or a parent for a child.

Oldmixon says there is a tool on the website that can help calculate how much education will cost by the time a person is ready to start school.

There are 14 different portfolio options depending on the levels of investment risks you want to take. One of the options and the default portfolio, if invested through the PFD, is a tuition value guarantee at the University of Alaska.

“The portion of the money that you’ve invested equals a certain number of tuition credits at the University of Alaska,” says Oldmixon. “So for example, today, tuition is $282 a credit. So if you just put $282 into the account, you’ve essentially purchased one credit at the University of Alaska.”

She says if tuition increases by the time the money is to be used, the UA will credit the difference.

If the money invested in a 529 plan is used for something other than education, then it is subject to taxes.

Oldmixon also says if people do opt to invest half of their PFD into a 529 plan, they are automatically entered for the chance to win a $25,000 scholarship account giveaway.

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