Those saving for their retirement through a direct-deposit investment plan provided by Fidelity Investments will now be able to sock money away for college in the same fashion, the company said this week.
Fidelity has decided to offer a 529 college savings plan to companies that provide its 401(k) and other retirement savings services to their workers. Employees will be able to choose an amount that they want deducted from their paychecks, just as they currently do with their 401(k) plans, and that money will be invested in a 529 program, the company said.
"Payroll deductions are one of the most important features that encourage saving in 401(k) plans," said Kathryn Hopkins, Fidelitys VP of institutional retirement services. "We expect that by enabling workers to use direct deposits to save in 529 plans, these plans will become as popular for college savings as 401(k)s are for retirement savings."
Known as the Workplace 529 Program, the service will be offered to companies that use Fidelitys defined contribution plans beginning early next year. The program will build on a 529 plan that Fidelity currently offers. The firm says it currently serves more than 100,000 529 investors with more than $1.2 billion invested in the plans as of Dec. 10.
Raytheon, a defense technology contractor that specializes in aerospace electronics, will be the first to offer the Fidelity plan to its 148,700 employees.