Learn everything you need to know about Rhode Island's 529 Plans, including investment options, past performance, and tax benefits you can expect.
As the cost of college climbs ever higher, parents around the country look for new ways to save the tens of thousands of dollars it will take to put their child through school. Naturally, many families struggle to come up with such a huge amount of money through traditional saving methods, but with help from powerful financial tools like the ever-popular 529 plan, higher education can suddenly seem a lot more affordable. However, each family’s financial situation is different, so it’s important to weigh your options when considering a particular 529 plan, but with more than a hundred such plans available around the country, it can be tough to find the right one for you. Here, we’ll look at the three 529 plans available from the State of Rhode Island, complete with all the details that set these accounts apart from others; keep reading to learn more.
Although the particulars of any 529 plan are determined by the state that administers it, the basic features of these accounts are set by the federal government. Under Section 529 of the Internal Revenue Code, all accounts of this type enjoy complete immunity from the federal income tax, but only so long as the funds go toward a qualified distribution – i.e., something related to education. In the past, the list of acceptable uses was limited to higher education, but that list has expanded in recent years.
There are three types of 529 plans offered across the country, though Rhode Island only offers two of them: education savings plans (formerly known as college savings plans) and an ABLE account. (Like most states, Rhode Island does not offer a prepaid tuition plan, the third type of 529 plan.)
The first of these accounts, the education savings plan, is the most widely available, and it’s much more flexible than a prepaid tuition plan. The funds in one of these accounts can be used for everything from tuition and fees to room and board, books, and computers or other equipment. In addition to their college-related uses, education savings plans can also be put toward the cost of attending a private elementary or secondary school or vocational school or even the cost of an apprenticeship. Rhode Island offers two versions of this plan, CollegeBound Saver and CollegeBound 529, both of which can take advantage of the Upromise rewards program.
ABLE accounts, on the other hand, offer the greatest flexibility of all. Because they were designed to help Americans living with disabilities save for essential expenses, these accounts (which are also known as 529A accounts) can be used for housing, job training, medical bills, personal support services, and the same education-related expenses allowed under other 529 plans. In Rhode Island, these accounts are available through the RI’s ABLE program.
Aside from the ground rules for the various 529 plans set by the federal government, the details of the various 529 plans can differ significantly from state to state. Below, we’ll look a little closer at some of the features that set The Ocean State’s options apart from others around the country.
The most straightforward of Rhode Island’s 529 plans is the CollegeBound Saver plan (not to be confused with CollegeBound 529). Unlike its similarly named cousin, this account is what’s known as a direct-sold plan, meaning that it’s provided by the state directly, rather than through a financial advisor.
The trade-off here is that direct-sold plans feature fewer support services, but as a result, they also carry lower fees. That said, investments made through the CollegeBound Saver program still enjoy some oversight by financial professionals from Ascensus College Savings, which serves as the plan manager.
The advisor-sold counterpart to CollegeBound Saver is also managed by Ascensus College Savings, but it’s Invesco Advisors, Inc., that handles all the investments. Because of the greater involvement on the part of financial advisors, this plan may provide better returns, but it also has higher fees. In addition, the CollegeBound 529 program offers a few more investment options than other Rhode Island plans, so it may be the better pick for those with experience making investments.
Along with those from 17 other states, the RI’s ABLE program is part of the National ABLE Alliance, which means lower fees and stable, well-run investment options for the owners of a Rhode Island ABLE account. Like any ABLE account, enrollment requires proof of a disability that was established before the age of 26, though you can still open an account after that age. In most other respects, the RI’s ABLE program operates in a similar fashion to Rhode Island’s educations savings plans, except that the owner of an ABLE account is also the beneficiary.
When comparing the investment options under a particular 529 plan, you’ll want to look at both types of portfolios these accounts offer – age-based portfolios and static portfolios – and consider the degree of control you want to maintain over your investments.
For those who are less familiar with investing, an age-based portfolio may be ideal, especially if the beneficiary of the plan is still very young. These portfolios are designed to gradually become more conservative as college approaches, ensuring that any gains made early in the life of the account are preserved and giving plenty of time to make up potential losses.
Account owners with substantial experience making investments may prefer a static portfolio to the automated, age-based option. Most 529 plans, including those from Rhode Island, offer a wide variety of funds to choose from, allowing static portfolios to take on whatever level of risk the owner is comfortable with. Investments made in this type of portfolio stay the same until the account owner makes a change themselves, so they tend to require a more hands-on approach.
Whether you choose an age-based or static portfolio, it’s worth noting that you can change your asset allocation after setting up your plan, though each account owner only has two chances to do so per year. (Automatic changes in an age-based portfolio don’t count toward this limit.) There is, however, a fairly simple way around this restriction: changing beneficiaries allows you to change your investments without affecting your annual allotment. In addition, any account owner can change how future contributions will be invested as much as they’d like, with no limit.
The following are the investment options you can choose from under each of Rhode Island’s 529 plans:
This Rhode Island 529 plan has three classes of portfolio: age-based options (constituting 11 age bands), target risk options, and individual options; the latter two are both considered static portfolios. Age-based options revolve around the beneficiary’s expected year of enrollment. This selection is based on an early 2021 birth date.
• CollegeBound 2039-2040 Portfolio
• CollegeBound 2037-2038 Portfolio
• CollegeBound 2035-2036 Portfolio
• CollegeBound 2033-2034 Portfolio
• CollegeBound 2031-2032 Portfolio
• CollegeBound 2029-2030 Portfolio
• CollegeBound 2027-2028 Portfolio
• CollegeBound 2025-2026 Portfolio
• CollegeBound 2023-2024 Portfolio
• CollegeBound 2021-2022 Portfolio
• CollegeBound Today Portfolio
• Growth Portfolio
• Moderate Growth Portfolio
• Conservative Growth Portfolio
• Bond Portfolio
• Inflation-Protected Bond Portfolio
• U.S. Small-Mid Cap Portfolio
• U.S. Stock Portfolio
• International Stock Portfolio
• Equally-Weighted S&P 500 Portfolio
• Global Responsible Equity Portfolio
• Stable Value Portfolio
Some of the investment options under the CollegeBound 529 program are very similar to those available through CollegeBound Saver plans, though the management and performance of those portfolios are different. This advisor-sold plan has unique individual portfolios, however; these are sorted into Balanced, Capital Preservation, Equity, and Fixed Income classifications. In addition, all portfolios are available in one of seven classes, and each version carries its own rate of return and attendant costs.
• Invesco CollegeBound 2039-2040 Portfolio
• Invesco CollegeBound 2037-2038 Portfolio
• Invesco CollegeBound 2035-2036 Portfolio
• Invesco CollegeBound 2033-2034 Portfolio
• Invesco CollegeBound 2031-2032 Portfolio
• Invesco CollegeBound 2029-2030 Portfolio
• Invesco CollegeBound 2027-2028 Portfolio
• Invesco CollegeBound 2025-2026 Portfolio
• Invesco CollegeBound 2023-2024 Portfolio
• Invesco CollegeBound 2021-2022 Portfolio
• Invesco CollegeBound Today Portfolio
• Invesco Growth College Portfolio
• Invesco Moderate College Portfolio
• Invesco Conservative College Portfolio
• Invesco Equity and Income Portfolio
• Invesco Stable Value Portfolio
• Invesco Diversified Dividend Portfolio
• Invesco Equally-Weighted S&P 500 Portfolio
• Invesco FTSE RAFI Developed Markets ex-U.S. Portfolio
• Invesco FTSE RAFI U.S. 1500 Small-Mid Portfolio
• Invesco International Growth Portfolio
• Invesco MSCI World SRI Index Portfolio
• Invesco Small Cap Growth Portfolio
• Invesco Core Plus Bond Portfolio
• Invesco Short Duration Inflation-Protected Portfolio
The list of investments available through RI’s ABLE is considerably shorter than the others, making the investment process much simpler. In addition to the six target risk portfolios listed below, the program offers a checking account with Fifth Third Bank, National Association, designed to preserve capital without generating returns.
• Aggressive Option
• Moderately Aggressive Option
• Growth Option
• Moderate Option
• Moderately Conservative Option
• Conservative Option
All investment accounts, from IRAs to 529 plans, attempt to distinguish themselves by outperforming others in the field and providing the greatest possible returns given a particular level of risk. As a result, many prospective account owners like to look at a plan’s performance metrics before signing up. In this section, we’ll look at the rates of return for each of Rhode Island’s 529 plans – averaged over the last three years, unless otherwise specified – to help you decide on a plan for you or your loved one.
All of the investment options available through CollegeBound Saver have data beginning in July 2016, which is when these plans were created, except the two youngest age-based portfolios.
• CollegeBound 2039-2040 Portfolio: 19.60% (over six months)
• CollegeBound 2037-2038 Portfolio: 13.83% (over one year)
• CollegeBound 2035-2036 Portfolio: 8.80%
• CollegeBound 2033-2034 Portfolio: 8.23%
• CollegeBound 2031-2032 Portfolio: 7.66%
• CollegeBound 2029-2030 Portfolio: 7.27%
• CollegeBound 2027-2028 Portfolio: 6.91%
• CollegeBound 2025-2026 Portfolio: 6.45%
• CollegeBound 2023-2024 Portfolio: 5.66%
• CollegeBound 2021-2022 Portfolio: 4.74%
• CollegeBound Today Portfolio: 2.61%
• Growth Portfolio: 9.81%
• Moderate Growth Portfolio: 8.84%
• Conservative Growth Portfolio: 7.77%
• Bond Portfolio: 5.41%
• Inflation-Protected Bond Portfolio: 3.45%
• U.S. Small-Mid Cap Portfolio: 15.35%
• U.S. Stock Portfolio: 14.51%
• International Stock Portfolio: 5.01%
• Equally-Weighted S&P 500 Portfolio: 10.33%
• Global Responsible Equity Portfolio: 4.07%
• Stable Value Portfolio: 2.16%
Under the umbrella of CollegeBound 529, there are a total of 175 performance metrics available from 25 portfolios with seven classes each. In the interest of brevity, we’ve included the performance of the plan’s Class A portfolios below; further performance data is available on the Invesco website.
• Invesco CollegeBound 2039-2040 Portfolio: 18.79% (over six months)
• Invesco CollegeBound 2037-2038 Portfolio: 9.62% (over one year)
• Invesco CollegeBound 2035-2036 Portfolio: 6.62%
• Invesco CollegeBound 2033-2034 Portfolio: 6.32%
• Invesco CollegeBound 2031-2032 Portfolio: 6.02%
• Invesco CollegeBound 2029-2030 Portfolio: 5.75%
• Invesco CollegeBound 2027-2028 Portfolio: 5.45%
• Invesco CollegeBound 2025-2026 Portfolio: 5.15%
• Invesco CollegeBound 2023-2024 Portfolio: 4.69%
• Invesco CollegeBound 2021-2022 Portfolio: 4.11%
• Invesco CollegeBound Today Portfolio: 2.37%
• Invesco Growth College Portfolio: 6.98%
• Invesco Moderate College Portfolio: 6.58%
• Invesco Conservative College Portfolio: 5.22%
• Invesco Equity and Income Portfolio: 6.03%
• Invesco Stable Value Portfolio: 1.64%
• Invesco Diversified Dividend Portfolio: 4.89%
• Invesco Equally-Weighted S&P 500 Portfolio: 9.86%
• Invesco FTSE RAFI Developed Markets ex-U.S. Portfolio: 0.42%
• Invesco FTSE RAFI U.S. 1500 Small-Mid Portfolio: 6.13%
• Invesco International Growth Portfolio: 7.11%
• Invesco MSCI World SRI Index Portfolio: 3.67%
• Invesco Small Cap Growth Portfolio: 21.15%
Fixed Income Portfolios
• Invesco Core Plus Bond Portfolio: 5.77%
• Invesco Short Duration Inflation-Protected Portfolio: 3.02%
As mentioned above, RI’s ABLE has the following six portfolios, plus a checking account that does not offer a rate of return (and so is not listed below.
• Aggressive Option: 10.05%
• Moderately Aggressive Option: 9.27%
• Growth Option: 8.40%
• Moderate Option: 7.42%
• Moderately Conservative Option: 5.69%
• Conservative Option: 3.26%
Not all states offer a tax break for contributions to a 529 plan, but Rhode Island is one of those that does. Although there’s a group of seven states that offer tax deductions for contributions to any 529 plan, Rhode Island requires that the money goes toward one of that state’s plans in order to be eligible.
Anyone who owes personal income tax to The Ocean State can deduct up to $500 in contributions per year per person, or $1,000 for married couples filing together. Rhode Island also allows for an unlimited carryforward of contributions beyond that limit, which could help preserve the deduction from one year to the next.
The exception to this rule is the state’s ABLE account; contributions to this plan are not eligible for a tax deduction. Note also that rollovers from other 529 plans are not eligible for a deduction.
Despite the apparent complexity of these accounts, opening a 529 plan in Rhode Island is not an overly tedious process. In most cases, it can be accomplished in 15 minutes or less, especially with help from Sootchy. Our free app makes it easy to open a 529 plan in Rhode Island; download it today on your mobile device.
As a direct-sold plan, CollegeBound Saver allows prospective account owners to sign up themselves by submitting the proper information. Generally, this will include names, addresses, Social Security Numbers, and other basic details pertaining to both the account owner and the beneficiary. In addition, you can opt to name a successor account owner who would take over stewardship of the plan in the event that you can no longer manage it. The last pieces of information you’ll need are the appropriate bank account and routing numbers.
Once the initial form has been filled out, you can make whatever initial investment you’d like, as CollegeBound Saver has no requirement for minimum contributions. Then, you’ll choose how your funds will be invested, and the account should be all set.
The process may be a bit different depending on who is opening the 529 plan and where the money is coming from; a business entity may have to follow a separate process, for instance, and moving money into a Rhode Island plan from another state’s program will come with its own set of requirements as well.
Like other advisor-sold plans, the CollegeBound 529 program requires that future account owners open a plan through their financial advisor, rather than signing up themselves. Contact your financial advisor if you would like to explore one of these plans.
One of the distinctions separating RI’s ABLE plans from others in the state is that the beneficiary of the plan is also the account owner. Therefore, when opening a plan, all an applicant will need is their own street address, Social Security Number or Taxpayer Identification Number, date of birth, and bank account and routing numbers. Then, all that’s left is to make an initial contribution of at least $25 – a number specific to Rhode Island’s plan – and choose your investments.