How to Find the Best 529 Plan

A 529 plan is an education savings account that's allowed certain tax advantages. It's a state-sponsored program that's operated by financial institutions. There are some variations to the plan details depending on the state. You will need to do some detailed research to select the best 529 plan for your needs.

Instructions

Difficulty: Moderate

1. Decide on the type of 529 plan you want to buy. You could prepay for future college education at qualified educational institutions at today's rates by buying units or credits. The other option is to invest in a tax-deferred educational savings plan.
2. Identify the educational institutions you are interested in and find out if they offer the 529 pre-paid plans. If your favorite institution doesn't offer it, you will have to consider the 529 savings plan instead.
3. Research available plans in your state. There are a number of websites that allow you to such research. A reliable resource is SavingforCollege.com (see Resources below). On that website, you can find available plans by state, by plan type or by plan name.
4. Consult with a 529 plan specialist. A specialist can advise you on the pros and cons of choosing one type of plan versus the other and can assist you select the best plan for your needs. Savingforcollege.com has a 529 plan professional consultant search feature (see Resources below) that you can use to find one in your local area.
5. Check if your state allows tax benefits on contributions to a 529 plan. If it does, you may want to select an in-state plan to take advantage of these benefits. Remember that you don't have to choose a plan from your state of residency.
6. Investigate the cost of the plan when you are investing in a 529 savings plan. There could be an administrative fee for the plan as well as fees assessed by the financial institution you select to manage the funds. Add up all of the costs for each plan and each institution you are considering and then compare the totals.

Tips & Warnings

• Find out the history of the financial institution you are considering. Each state provides multiple choices and each of them operates its funds differently. Understand their investment approaches and their track records in providing the best returns on investment.

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