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The best of all worlds in a 529 plan would be a plan that:1. Offers you extra incentive to contribute in the form of an immediate state tax credit or state tax deduction on money you put into the account if you are a resident of that state.
2. Allows you a few but not too many investment options, meaning you can put the contributions to work earning a return in one of several mutual fund choices. You would like to have available an “age-based” fund, which automatically and gradually changes your investment profile from ag...
Lyman provides a good summary of what to look for in a 529 plan. Some additional thoughts:
1. If the beneficiary of the plan you set up elects not to attend college you can move those funds to another person in the same generation.
2. You can move 529 funds from one state to another once per year.
3. There are international institutions which are qualified institutions for 529 tax benefits
4. Use the direct sold programs and a reliable name like Vanguard works well.
5. Sometimes 529 plans, because...
With the cost of college continuing to soar, many parents worry a great deal about how to afford it. A 529 plan is a great start for most parents and even grandparents. Some things to consider are:
· Start saving early.
· Consult your tax accountant to see if your specific state offers a state tax deduction.
· Compare the fees associated with different plans. Since saving for college tends to be a long-term investment, fees can make a big difference over long time horizons.
If your state offers a tax benefit, is usually best to find a plan from your state. Not all states require you to use their plan. You can easily find specific state tax benefits here:
If your state does not offer a tax benefit, look for low cost funds and good fund choices. Vanguard is a good option here.
I would suggest the one with the lowest cost. Consider using ones that have index funds since these accounts typically have a limited choice of funds so if an active manager does not perform well you may not have many choices to replace them with from within the limited stable of choices. Expenses therefore become the most important element in the decision process. You may also want to see if the 529 plan within the state you reside has some special advantages for you. For example in NY you can get a state income tax dedcution for you...
I agree with Stephen, expenses should be viewed as your worst enemy.
I'd further explain three factors in choosing a plan:
Have a question about finance?
- Can I use the money in a 529 account to cover study abroad and avoid the penalty?
- If son doesn't go to college, besides the 529 plan, where else can I set money aside for him?
- I'd like to start a 529 account for my newborn child. Do I go with the ScholarShare? Or are there better options out there?
- Should I consider, the RE-PAYE option to pay my student loans?
- Are there options to refinance student loans?
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