How to Choose The Best 529 Plan


One of the best college savings plan in the USA is the 529 plan for meeting the higher education expenses of your child or ward. The plan gives many benefits to its investors such as assured money, tax savings, growth based etc.How to Choose The Best 529 Plan

The plan is usually taken by a donor who can be a parent, grandparent, relative or a friend of a child who is considered the beneficiary of the plan. Since the plan offers many tax advantages, the plan becomes equally complex to understand. In this article I will write more about choosing the 529 plans:

Since 529 plans offer many advantages, for an investor it may perhaps look like the most ideal investment. But as I mentioned above the plan can be a bit confusing and complex at times.

Therefore as a seasoned investor one should first try to understand in depth about the 529 plan offered by the respective State. Each state has its own 529 plan which has got some different features from that of other states. Therefore pay close attention to the offer or disclosure statement.

Take the help of a good tax consultant to calculate your tax advantage, because the tax laws for a 529 plan always are subjected to frequent changes. However you can also take 529 plan of another state. But before doing that find out what additional benefits are provided by your state for the 529 plan for its own residents.

Brokerage charges for 529 plans are usually high; therefore go for a 529 plan which offers you no additional fee or load charges- entry or exit. A small difference in the fee of a 529 plan can make a big impact on your investment.

All of the TIAA-CREF plans (for New York, Kentucky, Georgia, Michigan, California, Oklahoma etc) are considered the best in 529 plans. Then we have Pennsylvania, Texas, Virginia and Iowa. Pennsylvania allows for tax deductions in contribution even for other state’s college savings plan.

Before selecting a good 529 plan check for the fee, initial investment requirements if any, guaranteed portfolio, support to other state plans etc.

Another important point to be noted is that while 529 plans are invested with after-tax income, the investment done grows tax deferred. If you are using the 529 savings for ‘really’ meeting higher education expenses you will never be required to pay any taxes on the earnings from the plan.

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