529 Plans: The Best Places to Invest Your Education Savings

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Looking for the best 529 plan to help you save for education expenses? Here’s my annual list of the top picks from around the U.S.

Clark Howard: Here Are the Best 529 Plans in the Country

Each year, I look through all the commission-free plans offered by states and identify the best 529 plans in the country. This year, I am so excited about my new, updated 529 plan guide because there is a lot of good news. In fact, the best 529 plans have the lowest management fees I have ever seen in the history of 529 plans.

Here’s what you’ll get in this guide:

  • Dean’s List: Only 529 plans with fees less than 0.20% annually made the grade.
  • Honor Roll: With the bar set so high for the Dean’s List, the Honor Roll includes plans that didn’t quite make the cut but are still ultra low-cost.
  • Teacher’s Pets: These plans are ideal for in-state residents because they offer state tax benefits and/or lower expenses to residents.
  • Needs Improvement: Avoid the plans of any states that appear on the Needs Improvement list — invest in a Dean’s List plan instead.

Fortunately, the number of good plans far outpaces the handful of bad ones.

As far as what’s driving all the cost-cutting across the industry, the direct-sold plans overall have lower costs than in the past for two reasons. As plans have gotten so much bigger, the cost of serving each future college student has gone down. In addition, strong competition among direct-sold commission-free plans has been intense.

If you decide to invest in a plan from this guide, pay close attention to the particular investment choices I recommend in some of the state plans.

When you see your state listed below, make sure you only invest in the exact state plan I show. That’s the key. Otherwise you could end up in a stinker of a plan.

And although you can use 529 plan money for school before college in many states, it is best to let your money have more years of tax-free growth for college instead.

How the 529 Plan System Works

This is what you need to know about this great tax-free way to save and spend on a child’s college education.

What Is a 529 Plan?

A 529 plan is a tax-free savings plan that is the best way to save for your child’s education. Prior to this year, 529 plans would allow you, a relative or a friend to put money aside as an investment for a child’s college education only.

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Now, thanks to changes in the tax code, money in a 529 can be used to pay for tuition at private schools for kindergarten through twelfth grade, as well!

With a 529 plan, the money grows tax-free and is spent tax-free for eligible expenses like tuition, books and fees.

One State Can Have Several Plans

529 plans must be sponsored by a state even though residents of most states can put their money in any state plan. (If you invest in the plan of a state where you don’t live, it doesn’t mean your child will have to eventually go to school in that state.)

Even more confusing, a state can sponsor more than one 529 plan. Some states have up to five different plans! I have never found more than one top-flight plan in any one state.

I have a direct link for you to the good plan in a state and you can usually invest directly online. If you just click on my link below, you won’t mess up and go to a bad state option.

If your state is on the Dean’s List, Honor Roll or Teacher’s Pets lists, choose it, because there may be state tax benefits that would make it a wiser choice for you.

However, if your state is not listed or you do not qualify for your state tax benefits, put your money in one of the states whose plan has the lowest expenses.

Clark Howard Ranks Best 529 Plans: Updated October 2018

These include California (0.11% to 0.16%), Illinois (0.12% to 0.15%) and New York (0.15%). They are my three favorite plans in the country because of the extremely low costs.


Dean’s List:

These are the very best plans in the country. Put your money here if your state isn’t listed in the Honor Roll or Teacher’s Pets categories.

StatePlan Information
ArizonaFidelity Arizona College Savings Plan (aged-based index only)
CaliforniaThe ScholarShare College Savings Plan (passive age-based option only)
DelawareDelaware College Investment Plan (Fidelity index age-based portfolios only)
IllinoisBright Start (Direct sold index age-based portfolios only)
MassachusettsU.Fund College Investing Plan (Fidelity index age-based portfolios only)
MichiganMichigan Education Savings Program
NevadaVanguard 529 College Savings Plan (age-based portfolios)
New HampshireThe UNIQUE College Investing Plan (Fidelity index age-based portfolios only)
New MexicoThe Education Plan Index (age-based portfolios)
New YorkNew York’s College Savings Program – Direct Sold
OhioOhio College Advantage 529 Savings Plan (invest only in Vanguard options)
Utahmy529 (Vanguard age-based portfolios only)

Honor Roll:

These plans, which actually showed up in the Dean’s List last year, were all just a hair away from making that cut again this year. They’re all ultra low-cost, but just a step behind the best.

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State Plan Information
GeorgiaPath2College 529 Plan
IowaCollege Savings Iowa
MinnesotaMinnesota College Savings Plan
WisconsinEdvest 529 College Savings Plan

Teacher’s Pets:

If you are a resident of a state below, enter that plan to get state tax benefits and/or lower expenses offered to residents.

State  Plan Information
AlabamaCollegeCounts 529 Fund (Age-based portfolios only)
AlaskaUniversity of Alaska College Savings Plan
ColoradoCollegeInvest Direct Portfolio
ConnecticutConnecticut Higher Education Trust (Direct sold only)
IndianaCollege Choice 529 Direct Savings Plan
IdahoIDeal
KansasLearning Quest 529 Education Savings Program (Direct sold only – equity index portfolio only)
LouisianaStart Saving Program
MaineNext Gen College Investing Plan – Client Direct Series
MissouriMOST – Missouri’s 529 College Savings Plan (invest only in Vanguard options)
NebraskaNebraska Education Savings Trust – Direct College Savings Plan
North CarolinaNorth Carolina National College Savings Program
(invest only in Vanguard options)
OklahomaOklahoma College Savings Plan – Direct Plan
OregonOregon College Savings Plan (Direct sold only)
PennsylvaniaPennsylvania 529 Investment Plan
Rhode IslandCollegeBound Saver (Direct sold only)
South CarolinaFuture Scholar 529 College Savings Plan – Direct Sold
TennesseeTN Stars College Savings 529 Program
VermontVermont Higher Education Investment Plan
VirginiaInvest529 (age-based portfolios)
WashingtonThe DreamAhead College Investment Plan
West VirginiaSmart 529 WV Direct College Savings Plan

Needs Improvement:

If your state is on this list, choose a plan from the Dean’s List instead.

  • Arkansas
  • Florida
  • Hawaii
  • Kentucky
  • Maryland
  • Mississippi
  • Montana
  • New Jersey
  • North Dakota
  • South Dakota
  • Texas
  • Wyoming

Important Factors to Consider Before You Invest in a 529 Plan

Age-Based Portfolios Allow You to Set It and Forget It

When you open a 529 account, do it in your name — not your child’s name. Your child should only be listed as a beneficiary. Assets in a 529 plan have very little effect in the financial analysis of most schools because kids are only listed as the beneficiary, not the owner.

Your money in a 529 plan is invested in a pool much like a mutual fund. I recommend that you look at the investment option available in most plans known as the “age-based portfolio.” This lets the plan seamlessly adjust your investment to a more conservative mix as your child gets closer to college age.

With an age-based portfolio, when your child is two or three, the plan may be heavily invested in stocks. As they reach 15 or 16, the plan will have less stocks and more bonds. This adjustment is done automatically by the fund’s manager. No action is required on your part. It’s true “set it and forget it.”

Warning: Save for Your Retirement Before a Child’s Education

You and I can’t control education costs. We can’t control investment returns. However, we can save money to defray college expenses, and we can choose the best 529 plans with the lowest costs.

Nevertheless, I want you to keep this caveat in mind at all times:

While wanting to save for your kids’ education is great, remember my first rule: You shouldn’t save a penny for education unless you are already saving the maximum you can for your own retirement.

The reality is that college can be paid for with grants, loans, scholarships and work. Retirement happens only if you have saved the dough.

What happens if your child doesn’t need the 529 money? In that case, it can be transferred to any eligible child who has educational expenses and spent tax-free. Or if your child qualifies for a “free ride” full scholarship for college, you can withdraw the 529 money and use it for anything and just pay tax on the earnings.

So if your child winds up not going to college at all and you just take the money for yourself, you pay the tax on the earnings plus a 10% penalty.

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For more money-saving advice about college, see our Education section.

Clark Howard carefully reviewed every commission-free plan in each state, and he only recommends one plan — if any — per state. Dean’s List criteria is determined by states with plans that charge less than 0.20% per year in total. This is Clark Howard’s opinion as of October 2018, and these plans are subject to change.

More Education and Saving Resources:



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