[Updated in October 2015: Interest rates were lowered to 1.0% at BB&T, 1.25% – 1.5% at Union Bank & Trust.]
If you like a principal-guaranteed option for a 529 plan account, but you aren’t quite sure about the MetLife stable value fund in the Colorado Stable Value Plus 529 Plan, here’s another option, although the interest rate you get is a lot lower.
Virginia’s CollegeWealth 529 Plan offers FDIC insured savings account through regional bank BB&T and Union Bank & Trust. The interest rate is 1.0% APY at BB&T, 1.25% – 1.5% at Union Bank & Trust. There is no monthly maintenance fee.
You don’t have to be a Virginia resident to use this plan. It’s OK to have two or more 529 plan accounts offered by different states for the same beneficiary. You can transfer money from one 529 plan to another 529 plan once a year for the same beneficiary.
The 1.0% – 1.5% rate from these savings accounts in the Virginia plan is better than similar options in other plans. For instance, the FDIC insured savings account in Utah’s plan pays only 0.33%. The money market fund from Vanguard in Nevada’s plan pays only 0.07%. The FDIC insured CDs in Ohio’s plan pay 1.5% only if you lock in for 4 years or more. A one-year CD in the Ohio plan pays only 0.5%.
The MetLife stable value fund in the Colorado plan guarantees its 3.09% rate through December 31, 2015. The savings accounts in the Virginia plan don’t have such a guarantee. As in other savings accounts, the interest rate can change at any time. If rates drop and you have better options, you are not locked in to anything. You can just move your 529 account to a different plan.
Anybody in the country can open a 529 plan account with BB&T or Union Bank & Trust. Once you get the account number, you can either transfer in a portion of an existing 529 plan account or contribute new money. After that, the account works just like a savings account. You get interest credited monthly.
This 529 plan is great for holding the bonds portion of your 529 account or for a student already in college or about to enter college. At that stage, you are better off with a savings account than a money market fund or a bond mutual fund.
[Photo credit: Flickr user Lee Cannon]
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W C Chee says
your article shows that Alliant has a 2% savings rate . Is this correct and available? Let me know and how .
Someone on bogleheads posted that Union First does in fact take out of state customers.
Does anyone have experience with BB&T and/or Union First and a view on which is easier to deal with? I realize that Union First has a lower breakpoint for its higher interest rate tier ($10K vs $25K at BBT) but since the value of that is minimal, I’m more interested in who is easier to deal with when we are ready for distribution or seek to effect another transfer. Thanks
Harry Sit says
I don’t know which is easier. BB&T is easy enough. Distributions and transfers are done through the VA 529 program administrator for both banks.
Michelle Morris says
I am a financial planner and just opened accounts for my own son and daughters of a client in the FDIC insured account at BB&T. The 2.25% rate over 25K is still in effect, of course it could disappear at any time, but we shall see. I found the application process very user friendly.
I am wondering if you have ever heard of this option and if so what your thoughts are: https://www.collegesavings.com/csbcms/advisor#.VD28DVckXte
They sent a promotional email to NAPFA members.
Harry Sit says
The yields on their fixed rate CDs are very low. The variable rate CDs linked to IC 500 college tuition index pay the index minus a big margin. The other one is linked to S&P 500 over a 5-year term; the quarterly averaging makes it unattractive.
Looks like BB&T have changed their rates: http://www.bbt.com/bbtdotcom/banking/savings/college-wealth-529-savings.page
$0 – $9,999 gets you 1.00%, $10,000 – $24,999 gets you 1.00%, and $25,000 – $99,999,999,999 gets you… 1.00%.
They’ve completely gutted their 529 account, and, of course, only a few months after I opened mine.
Harry Sit says
Thank you for the heads-up. The other bank in the CollegeWealth program Union Bank & Trust also lowered to 1.5% over $10k. I’m transferring to the Colorado Stable Value Plus plan.