NextGen 529 – Client Direct Series: 529 plan review

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Kathryn Flynn

By Kathryn Flynn

December 18, 2018


Plan Summary

The NextGen 529 Client Direct Series is a direct-sold 529 plan available nationwide through Merrill Edge. Investors can select from age-based, static and individual portfolio investment options featuring BlackRock mutual funds and iShares exchange traded funds (ETFs). The 529 plan is administered by the Finance Authority of Maine, which offers matching grants for eligible Maine residents.

Quick Facts

  • Program Manager: Merrill Lynch, Pierce, Fenner & Smith Incorporated 
  • Inception Date: 1999
  • Overall 5-Cap Rating:  Maine NextGen 529
  • State Eligibility Requirements: None 
  • Minimum Contributions:  $25 for lump sum contributions; may be waived for Maine residents eligible for certain grants or for those signed up for the automatic investment plan.
  • Maximum Contributions:  $475,000 total for all NextGen 529 plan accounts for the same beneficiary.
  • Matching Grants:  Maine residents may be eligible for a $200 initial matching grant, a $500 Alfond Grant,  a $100 Automated Funding Grant and/or an annual NextStep Matching Grant up to $300.
  • Qualified Expenses:  The NextGen 529 – Client Direct Series can be used to pay for college expenses, including tuition, books, supplies, some room and board, computers and related equipment and special needs equipment, and up to $10,000 per year per beneficiary for K-12 tuition expenses.

Pros of investing with the NextGen 529 –Client Direct Series 529 Plan 


Performance (4.17 out of 5*)

The 529 plan has strong long-term performance, ranking 6th out of 33 direct-sold 529 plans for the 10-year period ended 9/30/18.

Costs (4.36 out of 5*)

The 529 plan features low fees and expenses, with total asset-based expenses of the underlying investments ranging from 0.00% – 0.63%.

Reliability (4.70 out of 5*)

Merrill Edge, the 529 plan distributor, is part of Bank of America’s retail banking program. The 529 plan accepts contributions via automatic contributions, payroll deduction, check or electronic deposits.


Bank of America account owners can access their bank account and 529 plan with one login and make real-time transfers from the bank account to their 529 plan. Merrill Edge offers 24-hour customer service, including email and chat, and complimentary consultations with Merrill Edge Financial Solutions Advisors. Parents and grandparents can open a NextGen 529 – Client Direct Series online, and gift contributions can be made by an outside party who mails a check with a contribution coupon.


529 plan account owners can select from investment options offering varying levels of risk, including BlackRock mutual funds and iShares ETFs .

Benefits for Maine Residents

There is no Maine state income tax deduction for 529 plan contributions. However, Maine residents may be eligible for matching grant for contributing to a NextGen 529 plan account.

Cons of investing with the NextGen 529 — Client Direct Series 529 Plan 


Features (3.73 out of 5*)

The 529 plan’s underlying investment selection is limited to mutual funds and ETFs managed by BlackRock and iShares by BlackRock. 

K-12 Investment Options

At this time, the 529 plan does not offer age-based investment portfolios for account owners who are saving for K-12 education.


*Ratings based on latest 5-Cap Ratings

The NextGen 529 – Client Direct Series is best for:

  • Families saving for college
  • Families saving for K-12
  • Families looking for low-cost investments
  • Families who bank with Bank of America
  • Families who want to invest in ETFs

529 Plan FAQs

Are 529 plan contributions tax-deductible? Contributions to a 529 plan are made with after-tax money, and therefore are not deductible from federal income taxes. However, funds in a 529 plan grow tax-free and are not taxed when the money is used to pay for qualified higher education expenses.

Does the 529 plan beneficiary have to attend an in-state college? No, 529 plan funds can be used to pay for qualified higher education expenses at any eligible post-secondary education institution.

What happens to a 529 plan if the beneficiary doesn’t go to college? The earnings portion of non-qualified distributions will incur income tax and a 10% penalty. To avoid any paying taxes or penalties, the 529 plan account owner can change the beneficiary of the 529 plan account to another qualifying family member, save the funds for graduate school or a future grandchild, use the funds to further their own education or use the funds to pay for $10,000 per year for a qualifying beneficiary’s K-12 education.

Can a beneficiary have more than one 529 plan account? Yes, but each 529 plan can only have one beneficiary. For example, parents saving for multiple children should have separate 529 plan accounts for each child. 

What happens if I can’t afford monthly 529 plan payments? With a 529 plan, you can contribute as much as you want, whenever you want. After making the initial required minimum contribution, 529 plan account owners can set up an automatic contribution plan, or choose to make lump sum deposits at birthdays, holidays or any time their budget allows.

A good place to start:

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