Now that we're parents, we have 18 years to figure out how to pay for Baby Boy's college. After researching various options, we've decided to go with Ohio's CollegeAdvantage plan. In case you find yourself in a similar situation, I wanted to outline my thought process for selecting the best plan for us.
We're from Texas, which offers the Lonestar 529 and Texas College Savings plans. We don't have a state income tax, so there is no in-state tax deduction for 529 contributions. Other states' rules vary, so you should check out a list of states that offer a 529 Plan tax deductions. It’s not the most recent list, but the best I could find. If your state offers a tax deduction, it might be best to go with that plan. If not, look around at other states' offerings to see if you can find a better deal on fees and investment options.
What to look for in a plan:
- Minimum Investment
Some states require $1000 or more to start a 529, and others require as little as $15. Depending on how much you have to invest, this could be a factor.
- Maintenance Fees
Some plans charge yearly maintenance fees. Depending on the invest options and a plan's performance, this could eat up a good portion of your investment.
Similar to mutual funds, 529s have expenses. I tend to stick with index funds because of the low fees. I found fees ranging from .30 percent to well above 1 percent.
- Investment Options
Most 529s are set up like retirement plans, with age-based plans, equity plans, balanced plans, etc. Many plans also are operated by big names, such as Vanguard or Openheimer