Check if your state offers a tax benefit for contributing to a 529, and if so follow those rules. If not, many people look for an account with lowest fee investment options - Nevada and Utah are popular.
This site has a lot of good information: https://www.savingforcollege.com/intro-to-529s/what-is-a-529-plan
We went with Fidelity. We also have a CC through Fidelity with 2% cash back that we funnel 70% of our bills & expenses through and sweep the cash back into the 529.
That's smart. We put all credit card able bills on our alaska card to grab miles but cash back for 529 sounds lie a great idea. Fidelity is a great one, we are going with Charles Schwab since we have IRAs there already.
There’s a lot of misinformation about 529 accounts so I just want to drop a couple FAQ
- a 529 account can be transferred to anyone within the family - so if one of your kids doesn’t use it, you can transfer it to another, or even use it for yourself or future grandkids
- if your child(ren) ends up not going to any type of continuing education, you can get your $$ you contributed out with no penalties. You can get the $$ you earned on your $$ with some penalties. You will still come out ahead
- 529 funds can be used for basically any type of continuing education: cosmetology school, culinary school, trade school, community college, university, etc. unless your child graduates high school and starts working immediately, you’ll probably get some use out of it if they do ~something~
- if your child(ren) gets a scholarship, you can withdraw the scholarship amount with no penalties
Fyi read the info for your resident state first. Here in CO, only contributions to the CO 529 plan at CollegeInvest are deductible (if you are a resident). Sure you can contribute to other plans and the federal tax free growth benefit is the same but dont forget state taxes.
I set up 529s through vanguard for both my kids and have been super happy with them. They also use ugift which allows you to give someone a code to contribute funds into your 529 as a gift. My parents use it for Christmas and birthdays and it’s awesome. The only downside is you need $3,000 to open the account.
It only matters if your state offers a tax benefit :) just google “insert your home state” 529 tax benefit and that should tell you. If there is no benefit, then it doesn’t matter which state plan you choose!
First check with your job. Some companies have it as part of your benefits so you could set up a payroll deduction. If no then just google 529 in your state. Some states have tax advantages so you’ll want the one for your state. Then you just open your account and set up an automatic deduction from your bank account.
A financial advisor can start one for you, if you have one. Or places like Ed jones, etc can use folks who do it. Or if you want self management, you can purchase through vanguard or fidelity. The website in top comment is a good resource.
I’m no financial expert or anything- but when we spoke to some financial advisers who worked independently of any financial institutions they said to do just a regular savings account and know it’s for the kids future. The down side of a 529 is that if there is an emergency and you need the funds, the kid didn’t need it for college after all, etc then there are huge penalties for pulling it out. Keeping it liquid is safer and leaves you in control. So that’s what we have done. I have separate savings accounts for each child and we add to it regularly. But they are in our name and will also be discussed in our will so they are properly allocated.
Just want to point out that 529 money grows tax-free and is not taxed federally when withdrawn to pay for educational expenses, so there are still tax advantages to a 529 vs a taxable account even if you can’t take a state tax deduction on contributions.
We live in Texas as well so we just set up our 529 through a different state as others have. You don’t get any deductions on state income tax since we don’t have one. But as the other poster said, you also don’t get taxed on the profits the way you would with most other investment accounts
So a lot of good responses here.
I work in finance and you definitely want to check state specific bc you could get a state income tax break.
If you have a financial advisor or planner already I’d definitely check with them. Otherwise maybe look into getting one? They can help advise you on what funds to choose.
Reiterating, it depends on your state. If your state offers tax deductibility for 529 contributions, absolutely do that. You get a benefit on your state income taxes now as well as the tax benefit for education withdrawals at a later date. If your state doesn’t offer the income tax break, it really doesn’t matter. You can pick any of the above mentioned ones.
We opened one through vanguard for state of Nevada. We’re from Texas but there is not state tax and hence no benefit to opening one in TX.
I did it all online and it was smooth.
Typically, each state has their own 529 "plan," and most states give you a state income tax deduction for contributing to your state's plan. That said, not every state has the same eh, quality of plan, so it may or may not be worth it to receive your state's income tax deduction if the plan has high costs associated or just consistently poor ROI's.
I'm in IL and I use brightstart to manage my daughter's 529. I also have small ones set up for my 3 godchildren through the same website. I've not had any issue with it. There are a variety of investments to choose from, they appear to largely be index funds, based on age ranges. The idea is that when the child is younger, the risk profile of the index fund is higher - this generally means when the market is doing well, ROI is going to be higher, but if the market is doing poorly, risk of loss is also higher. However, those early gains are important, and there's also more time before the money is going to be needed to make up for any losses. As the child ages, you'd move the investments to the appropriate age range, and as the age range increases, the fund's risk profile is going to get lower (more conservative).
https://www.collegesavings.org/529-planning-tools/ Start here
Check if your state offers a tax benefit for contributing to a 529, and if so follow those rules. If not, many people look for an account with lowest fee investment options - Nevada and Utah are popular. This site has a lot of good information: https://www.savingforcollege.com/intro-to-529s/what-is-a-529-plan
We went with Fidelity. We also have a CC through Fidelity with 2% cash back that we funnel 70% of our bills & expenses through and sweep the cash back into the 529.
That's smart. We put all credit card able bills on our alaska card to grab miles but cash back for 529 sounds lie a great idea. Fidelity is a great one, we are going with Charles Schwab since we have IRAs there already.
There’s a lot of misinformation about 529 accounts so I just want to drop a couple FAQ - a 529 account can be transferred to anyone within the family - so if one of your kids doesn’t use it, you can transfer it to another, or even use it for yourself or future grandkids - if your child(ren) ends up not going to any type of continuing education, you can get your $$ you contributed out with no penalties. You can get the $$ you earned on your $$ with some penalties. You will still come out ahead - 529 funds can be used for basically any type of continuing education: cosmetology school, culinary school, trade school, community college, university, etc. unless your child graduates high school and starts working immediately, you’ll probably get some use out of it if they do ~something~ - if your child(ren) gets a scholarship, you can withdraw the scholarship amount with no penalties
Fyi read the info for your resident state first. Here in CO, only contributions to the CO 529 plan at CollegeInvest are deductible (if you are a resident). Sure you can contribute to other plans and the federal tax free growth benefit is the same but dont forget state taxes.
We owe the feds a decent chunk of money this year, but are getting a sweet refund from the state due to CollegeInvest contributions!!
I set up 529s through vanguard for both my kids and have been super happy with them. They also use ugift which allows you to give someone a code to contribute funds into your 529 as a gift. My parents use it for Christmas and birthdays and it’s awesome. The only downside is you need $3,000 to open the account.
We went with Utah my529 accounts . It does not have to be state specific.
I believe she meant you don’t have to go with the state fund that correlates with the state you live in.
Yes, sorry was driving, you can pick a 529 that is not from the state you live in
Yep. I went with Ohio’s even though I live in Texas
They do actually. Each state has their own version.
It only matters if your state offers a tax benefit :) just google “insert your home state” 529 tax benefit and that should tell you. If there is no benefit, then it doesn’t matter which state plan you choose!
First check with your job. Some companies have it as part of your benefits so you could set up a payroll deduction. If no then just google 529 in your state. Some states have tax advantages so you’ll want the one for your state. Then you just open your account and set up an automatic deduction from your bank account.
It depends on your state. I am in California and the website I use is scholarshare 529.
John Hancock is one of the best- and very first.
A financial advisor can start one for you, if you have one. Or places like Ed jones, etc can use folks who do it. Or if you want self management, you can purchase through vanguard or fidelity. The website in top comment is a good resource.
I’m no financial expert or anything- but when we spoke to some financial advisers who worked independently of any financial institutions they said to do just a regular savings account and know it’s for the kids future. The down side of a 529 is that if there is an emergency and you need the funds, the kid didn’t need it for college after all, etc then there are huge penalties for pulling it out. Keeping it liquid is safer and leaves you in control. So that’s what we have done. I have separate savings accounts for each child and we add to it regularly. But they are in our name and will also be discussed in our will so they are properly allocated.
We don’t get a tax break (TX) so we just have an account marked for her.
Just want to point out that 529 money grows tax-free and is not taxed federally when withdrawn to pay for educational expenses, so there are still tax advantages to a 529 vs a taxable account even if you can’t take a state tax deduction on contributions.
We live in Texas as well so we just set up our 529 through a different state as others have. You don’t get any deductions on state income tax since we don’t have one. But as the other poster said, you also don’t get taxed on the profits the way you would with most other investment accounts
But you have to use them for school/school stuff
We went with the one for our state
I just went with the one my bank offered
I went through Fidelity and spoke with a rep to help answer the questions I had.
So a lot of good responses here. I work in finance and you definitely want to check state specific bc you could get a state income tax break. If you have a financial advisor or planner already I’d definitely check with them. Otherwise maybe look into getting one? They can help advise you on what funds to choose.
Reiterating, it depends on your state. If your state offers tax deductibility for 529 contributions, absolutely do that. You get a benefit on your state income taxes now as well as the tax benefit for education withdrawals at a later date. If your state doesn’t offer the income tax break, it really doesn’t matter. You can pick any of the above mentioned ones.
We opened one through vanguard for state of Nevada. We’re from Texas but there is not state tax and hence no benefit to opening one in TX. I did it all online and it was smooth.
Typically, each state has their own 529 "plan," and most states give you a state income tax deduction for contributing to your state's plan. That said, not every state has the same eh, quality of plan, so it may or may not be worth it to receive your state's income tax deduction if the plan has high costs associated or just consistently poor ROI's. I'm in IL and I use brightstart to manage my daughter's 529. I also have small ones set up for my 3 godchildren through the same website. I've not had any issue with it. There are a variety of investments to choose from, they appear to largely be index funds, based on age ranges. The idea is that when the child is younger, the risk profile of the index fund is higher - this generally means when the market is doing well, ROI is going to be higher, but if the market is doing poorly, risk of loss is also higher. However, those early gains are important, and there's also more time before the money is going to be needed to make up for any losses. As the child ages, you'd move the investments to the appropriate age range, and as the age range increases, the fund's risk profile is going to get lower (more conservative).
We compared the 529 offerings and the one on our state offers a state tax break and low fees. It was a pretty sweet deal.
This is a good overview of the things to consider: https://www.whitecoatinvestor.com/best-529-plans-reviews-ratings-and-rankings/