College is a pricey proposition for most families, and saving enough to send a kid off to school can seem daunting. Fortunately, 529 plans can be a great help. They allow anyone to invest money into an account, with the gains growing tax free as long as the money is used to pay for educational expenses. In many cases, contributors also get a tax break based on the money they put in. But which plan should you pick?
You may instinctively sign up for the plan offered by your own state, but many 529 plans are open to anyone in the United States. The key to finding a good 529 plan is the amount of tax benefit offered to the person contributing to the account. It's also important to look at the quality and variety of funds offered, management fees, and other factors.
Here are the 9 best 529 plans based on these criteria.
1. New York
The 529 plan offered by the Empire State is one of the best-performers, according to SavingforCollege.com. And it has generous tax breaks, including deductions of up to $5,000 per year for an individual, and up to $10,000 per year for married couples.
The state's NextGen College Investing Plan has a nice mix of offerings, including Blackrock Funds and iShares ETFs, which have super-low expense ratios. There are also matching grants of up to $300 per year, and a tax break of $250 annually.
The best thing about the TNStars College Savings 529 Program may be its variety of options. There's an age-based option, which allows you to enter into a fund that adjusts its holdings according to when the beneficiary plans to attend college. Then there's a "static" option with 13 different individual selections. Tennessee also offers up to $1,500 in total matching contributions. (There are no additional tax breaks because Tennessee has no personal income tax.)
4. South Carolina
Open only to South Carolina residents, the Future Scholar 529 Plan has no minimum contributions. It has an option of age-based portfolios with three different risk levels, or seven target allocation portfolios. It has a super low expense ratio of less than .25%, and all contributions are fully tax deductible.
The START Saving Program is for Louisiana residents only, but it has a nice array of options, including age-based funds or any of six Vanguard mutual funds. There are no program, enrollment, or management fees, and fees of the underlying investments are low. Account holders can get an annual tax break of $2,400 per individual and $4,800 for married couples.
The ScholarShare College Savings Plan has a ton of options. There are two age-based options, and a whopping 17 static options, including a socially responsible investment option. Fees are very low, but there are no tax breaks.
7. West Virginia
The SMART529 WV College Savings Plan is powered largely by Vanguard index funds, so fees are low. The Bright Babies program offers a $100 one-time contribution from the state. Contributions are fully tax deductible.
Another Vanguard-driven plan, the Direct Portfolio College Savings Plan offers a $400 match for low and middle income residents, and many students would be eligible for up to $8,000 in scholarship money through the plan. Contributions are tax deductible.
Another plan with a lot of good variety, the Ohio CollegeAdvantage 529 Plan has two age-based options and 16 static options. Up to $2,000 in contributions is tax deductible. Fees are low, with some investments offering expense ratios of as little as .02%.