Top 529 Plans for College Savings: A Comprehensive Review

Imagine being able to transform your current college savings practices into a tax-advantaged investment for your child’s future education — that is the powerful potential of the best 529 plans. 

A 529 plan is a tax-advantaged investment for education that helps families save for future educational expenses, allowing funds to grow tax-free when used for qualified costs. The high contribution limits of a 529 plan can help cover college costs. These college savings plans can be started by parents, guardians, or anyone who wants to contribute to an investment for education that offers tax benefits, compounded returns, and, in some states, a tax deduction on contributions. Additionally, effective in 2024 as part of the recently-passed SECURE Act 2.0, if the beneficiary doesn’t use the funds for education, a portion of the plan can be rolled over to a Roth IRA in the beneficiary’s name as long as it meets qualifying conditions. 

An Investment For Education: The Importance of 529 Plans

College savings and education planning are significant goals for many American families — goals often accompanied by a constantly moving financial finish line. A recent report from the Education Data Initiative reveals that the average cost of an undergraduate degree in the U.S. can range from $25,707 to over $218,000. The final price varies based on several factors, including the institution attended and whether the student receives campus room and board. 

Parents and guardians also need to consider the rapidly rising cost of tuition at schools across the country. The same report also notes that, according to data from the Education Department, “the average tuition at a four-year private nonprofit university increased 14% between the fall of 2010 and the fall of 2021” and will continue to rise in 2024 to absorb rampant inflation and increased cost of living expenses. 

With so many factors to consider during education planning, many parents and guardians are leveraging 529 plans to help achieve their college savings objectives. 529 plans offer tax benefits and equip families with the tools needed to effectively navigate the rising costs associated with obtaining a higher education. 

Criteria for Evaluation: How to Identify The Right 529 Plans

A wide range of 529 plans are available, making it difficult for savers to choose the right option for their needs. When selecting the right 529 plans for your student, it’s essential to consider your unique financial circumstances, including your personal situation, risk tolerance, and overall investment time horizon. 

Additionally, there are several other key factors to help you choose the plan that maximizes your education investment. When assessing the quality and suitability of 529 plans, several key factors come into play:

Tax Benefits
Federally, 529 plans offer tax-free growth and withdrawals for qualified education expenses. Some states also provide additional tax deductions or credits for contributions to their 529 plans, which can significantly impact the plan’s overall value for residents.

Investment Options
Look for plans offering diverse investment choices, including age-based portfolios, static portfolios, and individual fund options. It’s important to note that, in most cases, you’re only allowed to make two investment changes per calendar year in a 529 plan. This makes it all the more important to find a plan that offers investment choices you’re comfortable with.

Fees
Determine any enrollment fees, program management fees, and annual maintenance fees associated with a specific college savings plan. 

Performance
It’s important to note that while past performance doesn’t guarantee future results, historical returns can indicate the potential of an investment strategy. Also, run benchmark comparisons to determine how a plan’s investments perform relative to relevant market indices.

Flexibility
Consider flexibility with contribution limits — higher limits could potentially allow for more significant savings. While there is no federal limit on the amount you can contribute, many states have aggregate contribution limits for a single beneficiary’s 529 plan. Additionally, you should assess a plan’s adaptability to changing circumstances, such as beneficiary changes, the frequency of modifying investment selections, and what qualifies as an educational expense.

State-Specific Benefits
It’s crucial to understand any additional state-specific incentives or advantages associated with the best 529 plans. Talk with a tax professional or financial advisor to determine components such as state-specific matching contributions, scholarship opportunities for account holders, and state laws that offer protection from creditors on 529 planned assets. 

529 Plan Review and Recommendations

It’s important to note that there’s no such thing as one-size-fits-all when choosing the best 529 plans for your future student. Working with a tax professional or financial advisor is the most effective way to help choose the right plan for your financial situation. These experts can help you evaluate the tax advantages, investment options, and other critical factors specific to your financial situation, ensuring you make an informed decision that maximizes your savings potential and aligns with your long-term educational goals. With that in mind, here are some of the top 529 plans available today.

Colorado’s CollegeInvest 529 Savings Plan 

• Tax Benefits: Federal and state tax-free growth; Colorado state income tax deduction for contributions.
• Investment Options: Four plans – Direct Portfolio, Stable Value Plus, Smart Choice, and Scholars Choice; range from aggressive to conservative options, including a FDIC-insured option.
• Fees: Recently reduced fees for Direct Portfolio plan; specific fees vary by investment option.
• Flexibility: High flexibility

New York’s 529 College Savings Program – Direct Plan

• Tax Benefits: New York state tax deduction for contributions.
• Investment Options: Low-cost Vanguard index funds.
• Fees: Very low fees.
• Flexibility: High, with easy online management.

Utah’s my529

• Tax Benefits: Utah state tax credit for contributions.
• Investment Options: Customizable options, including Vanguard, Dimensional, and PIMCO funds.
• Fees: Low fees
• Flexibility: Highly customizable with flexible options.

Nevada’s 529 College Savings Plan

• Tax Benefits: No state tax benefit (Nevada has no state income tax).
• Investment Options: Wide range, including Vanguard, iShares, and actively managed funds.
• Fees: Competitive fees
• Flexibility: Great flexibility with multiple plan options.

Virginia’s Invest529

• Tax Benefits: Virginia state tax deduction for contributions.
• Investment Options: Diverse options, including Vanguard and PIMCO funds.
• Fees: Low fees
• Flexibility: User-friendly with a range of investment choices.

SMART529 WV Direct College Savings Plan

• Tax Benefits: West Virginia state tax deduction for contributions.
• Investment Options: Age-based and static portfolio options using Vanguard index funds and an Invesco stable value option.
• Fees: Low fees.
• Flexibility: Accounts can be linked to the Upromise rewards service.

The Education Plan’s College Savings Program (New Mexico)

• Tax Benefits: New Mexico state tax deduction for contributions.
• Investment Options: Enrollment-based, index, and actively managed portfolios.
• Fees: Low fees.
• Flexibility: Managed by Ascensus College Savings with flexible investment options.

Edvest 529 (Wisconsin)

• Tax Benefits: Wisconsin state tax deduction for contributions.
• Investment Options: TIAA and T. Rowe Price funds.
• Fees: Low fees
• Flexibility: Direct-sold plan with low minimums and a variety of investment options.

Future Scholar 529 College Savings Plan (South Carolina)

• Tax Benefits: South Carolina state tax deduction for contributions.
• Investment Options: Columbia and Vanguard funds.
• Fees: Very low fees
• Flexibility: Offers age-based and static portfolio options.

Bright Start Direct-Sold College Savings Program (Illinois)

• Tax Benefits: Illinois state tax deduction up to $20,000 annually.
• Investment Options: Variety of options with low fees.
• Fees: Low fees.
• Flexibility: No minimum deposit requirement.

U.Fund College Investing Plan (Massachusetts)

• Tax Benefits: Massachusetts state income tax deduction up to $2,000.
• Investment Options: Managed by Fidelity, offers age-based, static portfolio, and interest-bearing account options.
• Fees: Low fees.
• Flexibility: Multiple investment options managed by Fidelity.

Destiny Capital Can Help You Navigate The College Savings Process

Selecting the right 529 plan is a crucial step in securing your child’s educational future. Fortunately, you don’t have to navigate the complex landscape of college savings alone. Destiny Capital’s team of professional financial advisors can help you create a college savings plan uniquely tailored to your family’s needs. Schedule a consultation today!