When it comes to selecting a 529 plan, you'll need to research the wide array of options, much like an investment fund.
Ultimately, it depends on your savings goals, risk tolerance and time horizon.
Bob Mecca, an independent fee-only certified financial planner in Hoffman Estates, Ill., says those looking to participate in a qualified tuition program, 529, should start by exploring the one available in their home state.
“Look first to see if there are any state tax incentives for residents to participate in home-grown 529 plans,” he says. “It’s great to get that extra tax break.”
Many states, for example, let residents deduct a percentage of their contributions—or waive state taxes on withdrawals for qualified educational expenses (matching the existing federal tax break). This fiscal incentive is worth a look, says Mecca.
Of course, you’ll still need to evaluate such factors as the fund manager, the kind of investment options available, and expenses.
Though 529s got a bad rap early on for charging excessive management fees, expense ratios have come down “quite substantially” on most plans, says Joe Hurley, a certified public accountant and founder of savingsforcollege.com.