21 States Offer FDIC-Insured 529 Plan Options

A recent Saving for College study found that twenty-nine 529 plans offered by twenty-one states offer investment options that are insured by the Federal Deposit Insurance Corporation (FDIC), including high-yield savings accounts and bank certificates of deposit (CDs). FDIC-insured investments are suitable for families who want to preserve capital in their 529 plan without taking on excess risk.

What are FDIC-insured investments?

FDIC-insured investments are backed by the full faith and credit of the United States government up to certain limits in the event of a bank failure. This is an attractive feature for families with a short time horizon to invest. If a student is approaching college or has already started college, they can take advantage of the tax benefits and flexibility of a 529 plan without risking their principal investment. The same strategy works for families who use a 529 plan to pay for K-12 tuition.

FDIC-insured options within 529 plans are also a good option for families who are risk-averse. For example, parents and grandparents who witnessed their retirement accounts or other savings get wiped out by the Great Recession may be hesitant to leave their child’s education fund at the mercy of volatile stock and fixed-income markets.

Our study found that in 2023, FDIC-insured options are offering significantly higher yields than in the past, with 22 options yielding at least 4% net of fees as of June 30, 2023.

The states listed in this table offer at least one FDIC-insured investment option within a 529 plan.

States that offer FDIC-insured investment options within 529 plans

Source: 2023 FDIC-Insured Products in 529 Plans, Savingforcollege.com