A 529 college savings plan can be excellent if you’re looking to save up money for a family member’s education. Understanding the ins and outs though can help ensure you’re choosing the best plan for you and yours. Here are some facts you need to know about plans and how to go about picking the best one.
What is a 529 College Savings Plan?
A 529 college savings plan is an account that is dedicated towards saving up for educational expenses. This can include tuition as well as room and board, books, and more. It can be purchased by a family member or even a friend for one person. If this person decides not to attend college, the plan can then be put in someone else’s name.
These plans can come from with a few advantages including tax dedications, tax credits, and potentially more financial aid for the student depending on how the plan was set up.
How to Pick a 529 College Savings Plan
Every state has a 529 college savings plan, and you actually don’t have to go with your home state! You can choose one from any of the 50. These are a few places to begin when it comes to your research on the best plan for you:
What to Look Out For
As you start your search for the best 529 college savings plan for you and yours, you need to know what to look out for. You should be comparing:
- Return on investment
- Fees and other costs
- Tax benefits
- Some states offer tax benefits to in-state residents, for example
- The different investment options
- Minimum required contributions
- These vary quite a bit by state. Some may require at least $3,000, while others may ask that you invest at least $15 a month.
- Direct-sold 529 plans vs. advisor-sold plans
- Advisor-sold plans may come with sales commission charges.
- Reviews and ratings
Your home state 529 college savings plan may not be the one you go with in the end, but it is a great place to start. It gives you a baseline to work with, and it could prove to be the winner out of the states’ plans that you compare. Some states offer tax breaks for state residents, which could be the deal breaker in the end.
Other states however may offer lower fees, better ratings, or minimum contributions that fit your current budget.
Is a 529 Savings Plan for You?
A 529 college savings plan can be truly beneficial to your finances today and in the future when your loved one attends higher education. However, you don’t have to automatically go with your state’s plan. Doing your research into the various plans available can help you determine the best one for your needs and wants. You may want to consider working with a financial adviser if you don’t have the time for all the comparisons or legwork.