18 states offer 529 plan options that are insured by the Federal Deposit Insurance Corporation (FDIC), including high yield savings accounts and bank certificates of deposit (CDs). FDIC-insured investments are suitable for families who want to preserve capital in their 529 plan without taking on excess risk.
What are FDIC-insured investments?
FDIC-insured investments are backed by the full faith and credit of the United States government up to certain limits in the event of a bank failure. This is an attractive feature for families with a short time horizon to invest. If a student is approaching college or has already started college, they can take advantage of the tax benefits and flexibility of a 529 plan without risking their principal investment. The same strategy works for families who use a 529 plan to pay for K-12 tuition.
FDIC-insured options within 529 plans are also a good option for families who are risk-averse. For example, parents and grandparents who witnessed their retirement accounts or other savings get wiped out by the Great Recession may be hesitant to leave their child’s education fund at the mercy of volatile stock and fixed-income markets.
The states listed in this table offer at least one FDIC-insured investment option within a 529 plan. Two additional 529 plans offer similar investment options that are not FDIC-insured:
- North Carolina’s National College Savings Program offers the Federally-Insured Deposit Account, which is insured by the National Credit Union Administration (NCUA)
- Wisconsin’s Edvest 529 plan also offers CD investment options, but they are not FDIC-insured
States that offer FDIC-insured investment options within 529 plans
Source: 2019 FDIC-Insured Products in 529 Plans, Savingforcollege.com
