State 529 plans usually trump other options. The right one for you depends on what kind of investor you are. Thinkstock For most parents, saving for college feels like climbing to the summit of a very tall mountain. And it doesn’t help that the path keeps getting steeper; tuition hikes have far exceeded inflation over the past several decades. If your child is a newborn, expect a degree from a four-year, in-state public college to run about 2,000, assuming 5% annual growth in the cost of college; four years at a private school could be double that. TOOL: Find the Best 529 Plan for You Luckily, tools are available to help you scale the heights. State-sponsored investment programs known as 529 plans, as well as other kinds of savings programs, can provide the momentum you need to reach your goal. And you probably won’t need to save the full amount. Most families get a discount in the form of grants, scholarships and education tax breaks and use loans to fill the gap—more than two-thirds of college seniors graduate with student debt. A more realistic goal: Save about one-third of your expected college costs. When the time comes, current income, grants and loans can cover the rest. “ Planning ahead is the key,” says Betty Lochner, of the College Savings Plans Network, which collects data on 529 plans. ( To estimate what you’ll need to save under different scenarios, use the college-savings calculator by The College Board.) The best place to save is in a 529 plan. Sponsored by 48 states and the District of Columbia (neither Washington State nor Wyoming offers a 529 savings plan these investment accounts let your savings grow tax-free, and the earnings escape tax completely if the withdrawals are used for qualified college expenses, which include tuition, fees, and room and board. The appeal of 529 plans lies in their easy access as well as their tax benefits. The plans.
A 529 Plan is the best way to save for your kid's college. 529 plans - aka college-savings plans - allow you, a relative or a friend to put money aside as an investment for a child's college education. The money grows tax free and is spent tax free for eligible college expenses such as tuition, books and fees. I have just finished my research on all the non-commission 529 plans around the country and the trend from late time is continuing. The 529 plans are steadily better and better in many states. I love how the costs for you are now below the average costs for a mutual fund! In a handful of states, the only recommended choices are index age-based plans. Some states now have both age-based portfolios with high costs and index-age based plans with low costs. In my current update, I only include plans that charge less than 1% per year to manage your 529 account. The best plans are below 0.4% per year. That means almost none of your money is being diverted to the 529 manager allowing greater savings for your kids' college. Here's an explanation of how the 529 plan system works One state, many plans 529 plans must be sponsored by a state even though residents of most states can put their money in any state plan. ( Just because you invest in the plan of a state where you don't live, that doesn't mean your child will have to eventually go to school in that state.) Even more confusing, a state can sponsor more than one 529 plan. Three states have 5 different plans! I have never found more than one top flight plan in any one state. When you see your state listed below, make sure you only invest in the exact state plan I show. That's the key. Otherwise you could end up in a stinker of a plan. I have a direct link for you to the good plan in a state and you can usually invest directly online. If you just click on my link below you won't mess up and go to a bad state.
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