ETFs are touted for the ability to trade throughout the day with the ease of a single stock. This trait, however, is not applicable to 529 plans because one of the guidelines to the plan is that trading can only happen once per year. The actual underlying investment still trades or re-balances regularly through the sponsor. [State Street Launches 529 Plan with ETFs]
Still, tax advantages are a huge part of owning a 529 savings plan. Any withdrawals used for college costs are tax-free and various states allow income tax deductions for contributions made, similar to retirement plans. [All-ETF 529 Plan Boasts ‘Strong Cost-Benefit Profile]
Overall, investors can expect the proliferation of ETFs within 529 college savings plans to continue alongside the growth of the ETF industry. The ETF business has grown 144% over the past 5 years, and has about $1.5 trillion in assets.
Tisha Guerrero contributed to this article.
