Almost every state offers a 529 savings program for investment in college funds. The plans are quickly becoming more and more popular because they offer high contribution limits and are federally exempt from taxes when the monies are withdrawn to use for college expenses.
Most people choose to stick with the plans offered in their state but this might not always be the best option. Almost half of the states offer some sort of incentive for residents so it is worth looking into what incentives are offered in your home state before venturing out to other states.
When considering investing in a 529 savings plan there are factors that must be looked at carefully:
- Quality of investments being made
- Flexibility of the investment choices
- A good record from the fund company of treating shareholders properly
Types Of 529 Savings Plans
There are two types of 529 savings plans investments. The first option is a savings plan. The savings plan allows for the entire amount of your investment to be used at any accredited college or university in the country. Investors will contribute to an account on behalf of a beneficiary and will have control over the investments being made through the fund. The savings plan allows for the entire amount of your investment to be used at any accredited college, accredited online colleges, or university in the country.
The prepaid investment provides for the purchase of tuition credits for a pre-determined amount of money. These plans are sponsored by the state and are meant for attendance at colleges and universities within that state.
States Worth Looking Into
With these concepts in mind, there are a few states that stand out as stars in investing in 529 savings programs, all in different ways.
The Illinois Bright Start College Savings Program is good for those looking to keep investment costs low. This plan is sold directly through the state and therefore no broker fees are involved. Illinois residents are also allowed a tax break for their contributions.
Best Mix of Investment.
The College Savings Plan of Nebraska has very diverse options for investing. It offers a selection of 20 different funds ranging from Fidelity to Vanguard and it keeps the fund costs and maintenance fees to a minimum. Nebraska offers tax breaks for residents who contribute to their 529 program.
Best Conservative Option.
The Michigan Educational Savings Program is run by TIAA-CREF and it is a good option for those who are reluctant to invest in the stock market. This plan offers a minimum yearly interest rate and guarantees principal. The annual fees in Michigan are very low. The Michigan program also gives tax breaks to Michigan residents when filing yearly taxes.
Best For Using An Adviser.
Virginia’s College America is one of the largest in the country and remains reasonably priced. The brokers have a wide range of investment options to cater a plan to suit the individual. The use of a broker also will come along with higher fees.
There are no rules dictating that you remain in your home state when considering investing in a 529 college savings program. Some of the states offer lousy programs and it may be worthwhile to check out what other states have to offer. Keep in mind though that many states offer tax breaks and those tax breaks may still make your state a better option.