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What Is The Best 529 Savings Plan For You?


What Is The Best 529 Savings Plan For You?

When saving for educational expenses, one of the key decisions you must make is what savings and investment vehicle is best. We have previously written a blog “How Should I Save For College?,” which talks about which vehicle might be best for you. In many cases a 529 savings plan is the best option, but the question on the heels of this one is which state’s 529 plan makes the most sense.

What is a 529 savings plan?

A 529 savings plan is a tax- advantaged savings plan designed to help individuals save and pay for education expenses. The plan itself was named after Section 529 of the Internal Revenue Code. This section allows tax-free status for qualified tuition programs, which includes most K-12 (up to 10K per year) and college expenses. This means you can save and invest funds in a designated 529 account and provided the distributions are used for qualified educational expenses, the earnings or growth can be withdrawn tax- free.

Which plan is the best?

This question does not have a black and white answer. Nearly every state has their own 529 savings plan, and many states have multiple plans. There is no limit on which state plan you can use. For example, you could live in Michigan, invest in the Ohio 529 plan, and your child could attend school in Florida. For this reason, when evaluating which plan is best for you, you need to consider multiple factors.

  1. Does the plan have any tax benefits?

For example, if you are an Ohio taxpayer, you may deduct contributions up to $4,000 per beneficiary, per calendar year on your Ohio income tax return if you use the Ohio College Advantage 529 savings plan. That alone might make sense for you to consider contributing at least the minimum amount to receive the maximum deduction.

  1. What fees are associated with the savings plan?

There are many possible fees associated with each plan. You can have an enrollment or application fee, an account maintenance fee, a program management fee, and the underlying investments can have fees as well. You need to review each of these potential fee areas when evaluating 529 plans. In Ohio, there are no enrollment/application fees, no account maintenance fees, and the program fees are extremely low at .02%. Additionally, the fund management fees are all extremely competitive, which makes the Ohio 529 savings plan attractive from a fee perspective.

  1. What investments are available?

When choosing your 529 plan, you will also need to evaluate the available investment options. Some plans are extremely limited in their options, and some have more robust options. For simplicity, many plans have started “age based” options which let you invest the funds based on the age of the beneficiary, allowing you to “set it and forget it.”  The investment will change the risk taken as the beneficiary gets closer to the age at which they will start taking withdrawals. There also are options based on your risk tolerance. You have the choice between conservative, moderate and aggressive allocations, and each of those can vary based on the age of the beneficiary. Lastly, many plans offer static stand-alone investment options. You can pick amongst growth, value, small-cap, large-cap, domestic and international.


To simplify the decision, many people will do an internet search for a list of the best 529 savings plans. Bear in mind that the decision is not that cut and dry. To make the best decision for you, you should carefully weigh the factors discussed above. Evaluate which factors are most impactful to you and choose the plan that makes the most sense for your situation.

Written by

Jimmy Stechschulte, CFA®

As a member of the Investment Committee, he performs investment research on both equity and fixed income products to help construct diversified portfolios for clients. Jimmy also meets with and assists clients with financial and retirement planning needs, estate planning, and tax planning issues.

See bio

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