Best 529 College Saving Plans

Since college tuition is increasing at a very fast rate, if you have kids, it helps to start thinking about saving for college when your kids are young. One of the best savings vehicles for college is a 529 plan. A 529 plan is a savings account that provides tax benefits when you use the money for your children’s K-12 or college tuition. Basically, the earnings you get from investing your money in a 529 plan are not taxed at all if you withdraw the funds to pay for K-12 school (up to $10,000 per year) or college tuition.

Since nearly every state offers a 529 plan, and you don’t have to sign up with the state’s plan where you live, how do you decide which state plan to go with? First, it helps to look at your home state’s plan to see if you get any special benefits for being an in-state resident. Many states offer state income tax deductions for the amounts you contribute to an in-state 529 plan. For example, in Alabama if you contribute $10,000 in one year to an Alabama 529 plan, and you are married filing jointly you can deduct the entire $10,000 contribution on your state tax return. Also, some states such as Arizona and Kansas offer tax deductions for contributions made to ANY 529 plan in any state, not just your home state.

If you live in a state that offers a 529 plan but doesn’t provide any tax benefits to in-state residents, it won’t help to just invest with a plan in your state. It’s better to look around and find the best plan available. Some things to consider are: 1) Fees (how much does the plan charge?) 2) Types of investments offered (i.e., what kinds of mutual funds or stocks can you invest in), and 3) Ease of use (i.e., is it fairly easy to set everything up online, including automatic contributions, beneficiary designations, etc.).

To view some ratings of 529 plans, you can visit or

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