td ameritrade 529 plan TD Ameritrade rating

TD Ameritrade 529 College Savings Account (2022)


Review of TD Ameritrade 529 Plan for College Savings: pros and cons, account fees, rating, minimum, investing options and commissions.


Review of 529 College Savings Plan at TD Ameritrade


If you’re looking to sock some money away for a child, grandchild, or other loved one, TD Ameritrade’s 529 Plan may be just what you’re looking for. While it is sponsored by the state of Nebraska, you don’t need to be a Nebraska resident to open a 529 account with the brokerage firm.


TD Ameritrade 529 Plan Details


Created by the U.S. federal government, qualified tuition plans (as they’re legally known) provide a tax-advantage method of saving for higher education expenses. Informally known as 529 plans, they are structured either as prepaid tuition plans or education savings plans. TD Ameritrade’s is the latter type.

Funds in a 529 plan can only be used for higher education expenses, including room and board. Funds cannot be used to pay for expenses at the high school level or under. 529 plans don’t have income restrictions.

Funds that are withdrawn but not used to pay for eligible higher education expenses are subject to taxes and fees.


TD Ameritrade 529 Plan


529 Taxation


Contributions to a 529 plan aren’t deductible at the federal level, although earnings do grow tax free; and there are no taxes on withdrawals. For estate and gift tax purposes at the federal level, contributions are usually treated as gifts to the beneficiary.

Contributions to a 529 plan may be deductible at the state level, depending on what state sponsors the plan.


TD Ameritrade’s 529 Plan


First National Bank of Omaha is the program manager of TD Ameritrade’s 529 Plan; while the Nebraska State Treasurer functions as the trustee. TD Ameritrade Investment Management, LLC, is the portfolio consultant.

A variety of investment options are available in TD Ameritrade’s 529 Plan. There are specific funds, such as the iShares Core S&P Small-Cap ETF (ticker symbol IJR) and the Vanguard Emerging Markets Stock Index Fund (ticker VEIEX). It’s possible to invest 100% of a plan’s holdings in one fund.

There are also investment themes, such as socially aware growth and core aggressive. One theme can have an allocation anywhere from 0% to 100%.

In total, there are 17 funds and 12 themes. Individual stocks or bonds cannot be traded; and other funds are out of the question as well.

Investment selections in a TD Ameritrade 529 Plan can be changed twice per year. If you transfer funds from another plan administered by the state of Nebraska, it will be treated as a change in investment choice.

TD Ameritrade will accept a personal check, ACH, rollover, or direct deposit to fund its 529 Plan. It’s also possible to establish periodic transfers online.


TD Ameritrade 529 Requirements


The TD Ameritrade 529 Plan does not have a minimum balance requirement, nor does the brokerage firm require any contributions at all. However, First National Bank of Omaha may close an account if it has a $0 balance.

There’s a maximum account value of $400,000. This cap applies to all accounts administered by the State of Nebraska for one beneficiary. This means that the maximum account balance for TDA’s 529 Plan could in some situations be lower than $400,000.


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The Cost of a 529 Plan with TD Ameritrade


TD Ameritrade charges no annual account fee for its 529 Plan. Moreover, there are no withdrawal, transfer, or enrollment fees. There is also no charge to modify investment options.

There are asset-based fees, however. They are:

0.25% program management fee 0.05% TD Ameritrade sub-administration fee 0.10% TD Ameritrade Investment Management portfolio consulting fee 0.02% state administration fee (for distributing, marketing, and overseeing the Plan)
These add up to 0.42% per year.

The underlying funds will also have expense ratios. For example, the Vanguard Real Estate Index Fund (VGSLX), one of the available investment options, charges 0.12% per year.

Choosing themes rather than funds won’t eliminate expense ratios. Themes have them as well; and they range from 4 basis points per annum up to 18 basis points.


Taxation of TD Ameritrade’s 529 Plan


Because TD Ameritrade’s 529 Plan is sponsored by the state of Nebraska, contributions are tax deductible on a Nebraska tax return, up to $10,000 per year. For married filing separately, the tax break is only $5,000. Contributions above these levels cannot be carried forward to future tax years.

Both earnings and contributions remain tax-free while they’re in the account. Earnings are tax-free when withdrawn. Contributions are taxable on a Nebraska return when withdrawn. A few states permit tax deductions for contributions to out-of-state 529 Plans.

Besides the account owner of the 529 Plan, the state of Nebraska also permits the custodian of a UTMA or UGMA account to make contributions to a 529 Plan and claim a state deduction.

All 529 plans have the same tax treatment at the federal level.


Opening a TD Ameritrade 529 Plan


A 529 Plan with TD Ameritrade can be opened by using either the broker’s online enrollment form or by filling out and mailing in this paper form. In either case, you’ll need information on the account owner (the person who legally owns the account and typically will be the one making contributions) and the beneficiary (the future student).

Because it’s possible to open a 529 plan for yourself, the beneficiary and account owner could be the same person.

Typically, the beneficiary is a child or grandchild of the account owner. But this is not required by law. The beneficiary and account owner can be unrelated.


Making Withdrawals from a TD Ameritrade 529 Plan


Withdrawals can be made online or via a paper form. There is no deadline to make withdrawals.


Other Education Accounts at TD Ameritrade


If TD Ameritrade’s 529 Plan doesn’t quite suit your fancy, the brokerage house offers some other accounts that may. For example, the Coverdell Education Savings Account can be opened. This one can be used for education expenses at any level, which obviously would be an advantage over the 529 plan in some situations.

Also available at TD Ameritrade are UGMA/UTMA accounts. While these aren’t technically education accounts (withdrawals can be used for any type of expense), they don’t have income restrictions, which the Coverdell account does have.


Brokerage Account Review


To learn in detail about all the great features and pricing TD Ameritrade brokerage offers on Joint Tenants and other accounts, visit TD Ameritrade Brokerage Review »


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About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.