Retirement & Financial Planning Report

Although many tax breaks created in the past decade may expire, 529 college savings plans have permanent tax benefits. Investments won’t be taxed, inside the plan, and withdrawals are tax-free if the money is used for higher education.

However, 529 plans vary from one state to another. Some charge higher fees than others. Usually, you will pay less for a plan that you buy directly from the sponsoring state. The typical cost for a directly-sold fund in a 529 plan is about 0.25% a year; if you invest in a 529 plan through a broker or a financial planner the annual fund fee might be 1% or more.

Many 529 plans now offer bank accounts with federal deposit insurance. If you want that kind of safety in your college fund, you might as well invest in a tax-free 529 plan that includes this choice.