Investment Options with a 529 Plan
A 529 plan is a hope for the future. Much of those hopes are pinned on uncertainties like the stock market, how well your child performs in school, and how well the plan you choose is managed. Where should you invest with 529 plans to get the best results? The choices is really dependent on the different programs available and what you plan to be your needs many years to come.
Start with Your Current State
For one thing, having your child attend college near home can save on tuition and increase the value of your 529 plan. That’s because some states do allow people who hold 529s to deduct some or even all of the contributions on their state income tax forms. This tax benefit will work for you as long as you remain a resident of that state and file your taxes there.
Avoid Plans Brokers Push
Sometimes brokers will push plans that offer them good kickbacks but may consistently under perform plans you buy directly from states. Understand that no one has your best interest more at heart than you. Brokers can even sell you a state plan, touting the tax benefits, but it can still make you less than if you found one that you could buy direct.
Buying Direct
That means you have to look around. You have to check out states where you think your kid might end up going to college. You have to take a look at the investment performance in the past to try and determine how it might perform in the future. You’ll want to understand the cost of the plan and any restrictions on withdrawals. It’s a bit more work than just having a broker choose a plan, but ultimately you’ll have far more knowledge about your future choices when the time comes to withdraw the money for its special purpose.
