You may have heard of 529s saving plan for future college costs. They are great since they are funded with aftertax dollars and grow tax-free. However they do have limitation in what you can use it for. In general, they have to be qualified education expenses. In addition, some states allow tax deduction on the contribution! Recently, with the new laws, you can now use the 529 for K-12 expenses.
Like 401K plans, not all 529 plans are of the same quality. Some have high fees and limited investment choices. Let’s take a look at some of the best plans according to morningstar (all rated GOLD). If your state have a high tax benefit, you should factor that in your decision making. If the tax benefit is 5% or more, might be worth while just sticking with your state’s plan.
- Utah’s my529 plan – Great customizable options for DIY investors. Multiple options from Vanguard and DFA funds. 4 age-based tracks.
- Virginia’s Invest529 plan – Great if you want an actively manage portfolio with low fees. Also has access to asset class not normally in other plans like global REITs, emerging markets, stable value.
- Nevada’s The Vanguard 529 College-Savings Plan – Strong Index-based plans. Low fee. 12 age based portfolios.
- Illinois’ BrightStart Direct-Sold College Savings program – With recently lowered rates, Illinois has now become competitive. Two types of age-based portfolios with three tracks based on risk tolerance. The state also recently eliminated a $10 annual account fee.