We all know that college costs are on the rise. In our last video, we discussed 3 ways to save for college. In this video, we want to explore 3 things to know before selecting a 529 college savings plan.
Do you have to choose your state’s 529 plan? No, but you may have some incentives to do so. The first thing to look for are any tax or matching benefits that your specific state offers for contributions into that state’s plan.
Are you a New York resident? Then you can deduct up to $5,000 for contributions to the plan ($10,000 for married couples). Do you live in Texas? Then consider yourself lucky because there are no state income taxes. Since there are no state income taxes, there are no state tax benefits on contributions to the Texas plan. Louisiana residents can deduct up to $2,400 for contributions to their plan ($4,800 for married couples), while California residents do not have any state income tax benefits.
The next item to consider are the costs involved with your state’s plan. Common costs involved with 529 plans are: enrollment fees, application fees, custodian fees, maintenance fees, and investment fees. These fees can add up over time, so be sure to know the costs involved before selecting a 529 plan.
Finally, you should know the investment options, and if they will meet your needs, before choosing a 529 plan. Most plans offer age-based options, as well as individual mutual funds that can be used to customize your investment experience. Some plans offer a broad range of investment options while other plans are limited to just one mutual fund company. If the plan you are looking at has very limited investment choices, you may want to consider other plans.
College expenses are a big burden on families. Not only do you need the proper vehicle for college savings, but you should also be sure that the vehicle maximizes your chances of being able to fund your child’s college education. If you need help evaluating your college savings options, please contact us today!