When evaluating a 529 plan, scrutinize its investment options. In some cases, a state’s plan may offer low costs and significant tax breaks to its residents but lack breadth in its investment lineup or high-quality investment options. Before deciding where to open a 529 plan, therefore, find the answers to these two questions:
A. Does the plan offer investment options that are structured to ensure proper allocation to stocks, bonds, and cash as a student nears college? (Alternatively, there might be choices you can make to become more conservative, reducing the risk of a stock market slide.)
B. Does the plan have enough standout investment offerings, within their asset classes, based on prior investment performance, expert management, and reasonable costs? According to mutual fund research firm Morningstar, these are the top choices:
Alaska T. Rowe Price College Savings Plan
Delaware College Investment Plan (Fidelity)
College Savings Plan of Nebraska (Multiple fund companies)
Utah Education Savings Plan Trust (Vanguard)
Virginia CollegeAmerica 529 Savings Plan (American Funds)
The fund companies mentioned above also manage 529 investments for other states. If your state offers a plan from one of these fund families, and tax breaks are offered to residents, it might pay to keep your college money close to home.
