The best 529 plans can be valuable tools for building college savings. So, if you're looking to save for your child or grandchild’s future college expenses, you’ve likely considered opening one of these tax-advantaged plans. But how do you choose the right one?
529 plans allow a contributor to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. While 529 contributions must be made with after-federal-tax money, your contributions grow free from federal or state tax, making them solid options for education savings. It's no wonder they have been rapidly growing in popularity.
However, 529 plans can vary. To select the best one, you’ll need to choose which type of plan makes sense for you and compare tax breaks, benefits for state residents, fees, contribution options, withdrawal restrictions and investment options between plans. Choosing the right plan can take a lot of research, but it’s worth it. An easy place to start is by checking out the top-ranked 529 plans.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Best direct-sold 529 plans
Direct-sold 529 plans are issued directly from a state financial institution. If you choose one of these plans, you’ll be responsible for managing your own investments within the plan’s online account portal. For this reason, these plans are usually cheaper than investor-sold plans.
Here are the top 10 highest-ranked direct-sold 529 plans, according to Saving for College.
- West Virginia – SMART529 WV Direct College Savings Plan
- Ohio’s 529 Plan, CollegeAdvantage
- Delaware College Investment Plan
- Fidelity Arizona College Savings Plan
- New Hampshire – UNIQUE College Investing Plan
- Massachusetts – U.Fund College Investing Plan
- Wisconsin – Edvest
- California – Scholarshare
- Alaska – T. Rowe Price College Savings Plan (tie)
- Alaska529 (tie)
Best advisor-sold 529 plans
Advisor-sold 529 plans are available through an investment firm. These accounts typically charge a higher fee, but financial advisers manage the plan’s investments for you. Some savers feel these accounts are worth the extra cost because of the access to professional investment advice, actively managed investments and flexible portfolios.
Here are the top 10 highest-ranked advisor-sold 529 plans, according to Saving for College.
- Putnam 529 for America
- BlackRock CollegeAdvantage Advisor 529 Savings Plan
- The Hartford SMART529
- John Hancock Freedom 529
- State Farm 529 Savings Plan
- College America
- Franklin Templeton 529 College Savings Plan
- New York's 529 Advisor-Guided College Savings Plan
- Tomorrow's Scholar 529 Plan
- Future Scholar 529 College Savings Plan (Advisor-sold)
529 prepaid tuition plans
Another college savings option worth considering is a 529 prepaid tuition plan. This type of plan lets savers prepay tuition at today’s tuition rates at eligible public and private colleges or universities. According to FINRA, "Most states guarantee that the funds you put into a prepaid plan will keep pace with tuition."
Prepaid tuition plans only cover tuition expenses, unlike 529 plans which cover other qualified expenses, like room and board, books and supplies. You can fund these accounts with one lump sum or through installment payments. Often, these plans must be used within 10 years, or the interest on initial contributions could be lost.
According to Financial Aid Finder, only 18 states offer prepaid tuition plans.
- Alabama***
- Colorado**
- Florida
- Illinois
- Kentucky*
- Maryland
- Massachusetts***
- Michigan
- Mississippi
- Nevada
- Ohio*
- Pennsylvania
- South Carolina
- Tennessee
- Texas*
- Virginia
- Washington
- West Virginia*
* Four states have temporarily frozen their prepaid plan to new investors.
** Colorado has permanently halted enrollment in its prepaid plan, although existing investors will still receive their tuition guarantees.
***Both residents and non-residents are invited to invest it these two prepaid 529 Plans.
529 plans can be part of your estate planning
Investing in a 529 plan is a great way for parents or grandparents to pass down wealth to the next generation. By helping college students graduate with lower or no student debt, you'll give your kids a leg up when it comes to starting their careers. For students interested in lower-income careers like the arts or non-profit work, graduating without debt may mean the difference between pursuing their dream career or slogging through a high-paying job they dislike to pay off debt.
A 529 plan may also jump-start your child or grandchild's retirement savings. They can roll over tax- and penalty-free up to a lifetime limit of $35,000 in a 529 to a Roth IRA opened by the 529 beneficiary for more than 15 years. The roll over is subject to annual Roth IRA contribution limits. What's not to like about this versatile savings tool? (The annual contribution limit is that of the beneficiary, not the parents).
Related Content
- 529 Plans Hit a New Milestone: Why They're So Popular
- This 'Super' 529 Strategy Can Help You Jumpstart College Savings
- Use the 529 Grandparent Loophole to Maximize College Savings
- Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Can the 'Guardrails Approach' Protect Your Retirement Investments?This investing method helps retirees avoid running out of money, even in a highly volatile market.
-
Walmart Week 2025: Exclusive Perks and Deals for Walmart+ MembersWalmart+ Week runs April 28 –May 4 with fuel savings, free express delivery and six months of Paramount+ with SHOWTIME. See all the perks.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Four Reasons It May Be Time to Shop for New InsuranceYou may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
-
How to Put Together Your Personal Net Worth StatementNow that tax season is over for most of us, it's the perfect time to organize your assets and liabilities to assess your financial wellness.
-
Bouncing Back: New Tunes for Millennials Trying to Make ItAdele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
-
What Are AI Agents and What Can They Do for You?AI agents promise to be the next big thing in artificial intelligence, but what exactly do they do?
-
Should You Buy an iPhone Now Before Tariffs Hit?Looming tariffs can make an iPhone purchase seem urgent. Here's what to do if you need another phone but want to save money.
-
Here's When a Lack of Credit Card Debt Can Cause You ProblemsUsually, getting a new credit card can be difficult if you have too much card debt, but this bank customer ran into an issue because he had no debt at all.
