Kim Finkle, MBA, Financial Advisor

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 Florida Prepaid plan doesn't have any federal or state taxes unless the money is withdrawn.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?

 

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.