Which 529 Plan Should New York Residents Use?

New Yorkers can choose to invest in almost any 529 plan, but they are eligible for state tax benefits through an income tax deduction if they use an in-state 529 plan. The state of New York administers two 529 college savings plans: New York’s 529 College Savings Program – Direct Plan and New York’s Advisor-Guided College Savings Plan. 

The main difference between the state’s plans is that one is a direct-sold 529 plan, and the other is an advisor-sold 529 plan. Direct-sold 529 plans can be opened online and generally have lower fees, while advisor-sold 529 plans are available through licensed financial advisors who can offer professional guidance on college savings. New York’s direct-sold option offers lower fees and more robust historical performance than New York’s advisor-sold 529 plan. 

Both plans offer the standard tax-advantaged benefits of 529 plans, which include tax-free withdrawals for qualified higher education expenses.

There is no minimum construction for New York’s 529 College Savings Program – Direct Plan, whereas there’s a $1,000 minimum contribution for New York’s Advisor-Guided College Savings Plan. New York State’s lifetime contribution limit is $520,000 per beneficiary.

How to enroll in a New York 529 plan

Families can open New York’s 529 College Savings Program – Direct Plan by clicking the ENROLL now button and completing an application online. The 529 plan account owner must provide their name, Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), date of birth, mailing address, telephone number, and email address.

A licensed financial advisor can help families enroll in New York’s Advisor-Guided College Savings Program.

New York 529 plan state income tax deduction

New York offers residents an annual state income tax deduction for contributions of up to $5,000 ($10,000 if married filing jointly) to a New York 529 plan. The state tax deduction is only available to the account owner or their spouse. If a grandparent or other individual makes a gift contribution to a parent-owned 529 plan account, they are not eligible for the deduction.

New York 529 plan fees

New York’s direct-sold 529 plan has a total asset-based expense ratio of 0.12%, one of the lowest available among 529 plans. The total asset-based expense ratio for the advisor-sold plan ranges from 0.28% to 1.99%, depending on the share class.

According to Savingforcollege.com’s most recent 529 fee study, the 10-year total asset-based fees on a $10,000 investment in New York’s direct-sold 529 plan would be $154. The 529 fee study does not include advisor-sold 529 plans.

New York 529 plan investment options

New York’s direct-sold 529 plan offers diverse investment options featuring Vanguard mutual funds. Portfolio options include:

• Age-based portfolios based on a desired level of risk (conservative, moderate, aggressive) that automatically shift to more conservative investments as the beneficiary gets closer to college
• Multi-fund portfolios with a target risk and investment objective (aggressive growth, growth, moderate growth, conservative growth, and income)
• Individual fund portfolios that invest in a single mutual fund
• An interest accumulation portfolio that is designed to protect the principal investment

Families who invest in New York’s advisor-sold 529 plan can select among investment options featuring mutual funds from JP Morgan and State Street Global Advisors (SSGA). Portfolio options include:

• Age-based portfolios that adjust allocations based on the beneficiary’s age
• Multi-fund portfolios with a target risk and investment objectives
• Individual fund portfolios from JP Morgan Chase and SSGA

New York 529 plan performance

New York’s direct-sold 529 plan ranks in the top 10 in Saving for College’s quarterly performance rankings.

Savingforcollege.com ranks the best 529 plans and assigns a 5-Cap Rating to each 529 plan based on performance, costs, features, reliability, and whether or not the plan offers any unique benefits for residents.

New York’s direct- and advisor-sold 529 plans received the following ratings for residents as of May 12, 2023:

Source: Savingforcollege.com data as of 5/12/2023