How to Choose the Best 529 Plan for You

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Mark Kantrowitz

By Mark Kantrowitz

December 14, 2023

With so many options, many savers wonder how to choose a 529 plan that fits their needs. 529 plan rankings and ratings are only one set of factors to consider in determining the best 529 plan for you. When choosing a 529 education savings plan, your choice should consider your personal situation, including your values, state of residence, risk tolerance, and investment time horizon.

Ultimately, your goal is to choose the 529 plan that maximizes the funds available for your child’s education.

A good place to start:

See the best 529 plans, personalized for you

Criteria for choosing a 529 plan vary depending on the plan’s characteristics and your family’s needs. Some of the most important criteria for picking a 529 plan include:

  • Performance. What is the annual return on investment?
  • Cost. What are the fees, including sales charges and the asset-based expense ratio? Check out the 529 plan fee study for more insight on low-cost options.
  • Direct-Sold vs. Advisor-Sold 529 plans. Direct-sold 529 plans tend to charge lower fees than advisor-sold 529 plans. Direct-sold 529 plans do not charge sales commissions, while some advisor-sold 529 plans do. For example, advisor-sold 529 plans offer several share classes, with Class A shares charging a sales commission and lower annual expense ratios. Class C shares don’t charge a sales load but have higher annual expense ratios.
  • Tax Benefits. 529 plans are considered tax-advantaged plans. Earnings accumulate on a tax-deferred basis. Distributions from a 529 plan are tax-free if used to pay for qualified education expenses. Contributions to a 529 plan can avoid gift taxes and provide estate planning benefits. In addition to these tax breaks, more than two-thirds of the states provide state residents with a state income tax deduction or tax credit based on contributions to the state’s 529 plan.

Nine states provide the state income tax break for contributions to any state’s 529 plan (Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio, and Pennsylvania).

Not every state offers a state income tax break on contributions to the state’s 529 plan. Nine states don’t have a state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). Four states have a state income tax but don’t offer a state income tax deduction or tax credit (California, Hawaii, Kentucky, and North Carolina).

  • Investment Options. 529 plans offer a limited selection of investment choices. Some offer static and multi-fund portfolios based on passive index funds, while others offer portfolios based on actively managed mutual funds. Some 529 plans offer FDIC-insured investment options, while others offer exchange-traded funds (ETFs). You might also find some 529 plans with more than one age-based investment option differentiated by risk tolerance.
  • Minimum Contributions. The minimum contribution in some states can be as high as $250 to $3,000 (e.g., Alaska, Arizona, Indiana, Montana, Nevada, New Jersey, Ohio, South Dakota, and West Virginia). In other states, the minimum contribution in an automatic investment plan is as low as $15 or $25 per month.

These criteria for selecting the best 529 plan may lead to tradeoffs.

For example, there may be a tradeoff between return on investment and fees. The 529 plans with the best investment returns may not necessarily have the lowest fees, or vice versa, so one has to evaluate the net return on investment after subtracting the fees. The net return on investment can vary depending on the investment time horizon. A longer horizon is necessary for a lower annual expense ratio to cover the cost of the sales load, which is typical for advisor-sold plans.

The benefits of a 529 plan may differ for in-state and out-of-state account owners in the 529 plan. For example, there may be a tradeoff between lower fees in an out-of-state 529 plan and a state income tax break for an in-state 529 plan. The tradeoff may vary depending on the years until the student enrolls in college, reaching an inflection point when the student starts high school. Some 529 plans provide incentives like seed contributions, matching contributions, and lower fees for state residents.

Which 529 Plan is Right For Me?

To pick the best 529 plan for you:

  • Consider your own state’s direct-sold 529 plan and whether your state offers a state income tax break and other benefits for state residents.
  • Research direct-sold 529 plans from low-fee states and 529 plans with top overall ratings.
  • Filter the list of 529 plans based on whether each 529 plan:
    • Offers the investment options you need. Most families choose an age-based portfolio, sometimes called a target-date portfolio, which adjusts asset allocation in your investment portfolio over time.
    • It has minimum contribution requirements you can satisfy.
  • Examine the remaining plans. Pick your home state plan if it offers fees under 0.50% or a state income tax break and your child is in high school.
  • Otherwise, choose the 529 plan with the best combination of high return on investment and low fees. provides a 529 plan comparison tool with detailed data on all the state 529 plans. This can help you identify the best 529 plans. You can also review a detailed profile of each state’s 529 plans.

A good place to start:

See the best 529 plans, personalized for you