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COLLEGE SAVINGS 101

What is the best 529 plan for me? (Script)

07/10/2013

QUESTION:
What is the best 529 plan for me?

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ANSWER:
The best 529 plan is the one that provides the greatest return on your invested dollars by the time you need the money to pay for college and gives you the fewest hassles or unpleasant surprises along the way. The problem is that it is impossible to know your investment return in advance or to anticipate surprises. But you can improve the odds a selecting a 529 plan that will provide a good return and deliver few surprises by doing some homework up front. For example, find out if your state provides you with a state income tax deduction that you don't get by using an out-of-state return. The extra return afforded by the tax break is 100% guaranteed. But also realize that the deduction might not outweigh the impact of high fees or below-average investment options. So what do I mean by hassles and surprises? Well, some 529 plans are less flexible than others. If you look to transfer account ownership in the future, you may be surprised to find out that your 529 plans does not permit account owner changes. If you wish to roll over your account to another 529 plan in the future, you may discover that your 529 plan will not transact a direct trustee to trustee transfer. There are many other examples found among different 529 plans. For many people, these restrictions are not important because they will never seek to transfer ownership, or roll over their account, or do whatever else is being restricted. The bottom line is that the best 529 plan for one family is not best for everyone. Use the tools available at savingforcollege.com, including the quarterly 529 performance rankings, the 529 fee study, and the plan comparison tool to help you in your research.

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