Merely having a specific college savings vehicle could encourage you to save more than you would have otherwise. And choosing a plan rather than a traditional savings account gives you the benefit of tax-free growth on investments and a potential state tax break. Some consumers may be concerned about the possibility that investing for college could lead to losses on your contributions, rather than earnings. That gives your money more time to grow.
Additionally, plans typically offer age-based investment portfolios, which help balance your investments based on how close your child is to college, potentially lowering your risk. For example:. Most recently, she was a staff writer and spokesperson at NerdWallet, where she wrote "Ask Brianna," a financial advice column syndicated by the Associated Press.
Select Region. United States. United Kingdom. All ratings are determined solely by our editorial team. Brianna McGurran. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. Read more. Our Guides. Our editorial ratings take into account each plan's investment performance history, fees, extra features and reliability as determined by Savingforcollege.
We only considered plans consumers in any state can access. Plan highlight Low fees. We award plans that we like with Morningstar Analyst Ratings of Bronze, Silver, or Gold, with Gold-rated plans having our highest conviction.
Here are some of the most important considerations when evaluating s:. Some other features you might want to consider are whether a plan offers aggressive, moderate, and conservative age-based portfolio tracks, and whether it is available through direct-sold as well as advisor-sold channels. Here's a framework for thinking it through: We group states into five categories.
Tax Parity: You get state income tax benefits for contributing to any state's plan. Tax Credit: A percentage of your contribution that directly reduces your state income tax bill. Unlike a deduction that lowers the amount of income subject to tax, a credit is a dollar-for-dollar reduction in your tax bill.
Tax Deduction : You can subtract part or all of your contribution from your income subject to state income taxes. No Benefit: Your state doesn't provide a state tax benefit for contributions to any plan.
No Income Tax: You live in a state with no state income taxes. Here are some of the most important considerations when evaluating s: Glide Path: How an age-based plan shifts to less-risky investments as your child nears college. We like plans with smooth transitions from stocks to bonds and cash as opposed to dramatic shifts.
Knowing this helps us better customize your experience. Sorry, child information is required. I am saving for Select one 1 child 2 children 3 children more than 3 children. I want to learn more about college savings.
I'm ready to open a plan. Password Show. Forgot your password? LOG IN. Enter your email address to begin the reset password process. Enter your e-mail address to begin the reset password process. Which plan investment options should I choose?
Find your plan - Select your state below Did you know that residents are not limited to investing in their own state's plan? Find a Plan. The age-based investment glide paths use a more aggressive mix of investments a higher percentage invested in stocks when the child is young and become more conservative as college years approach.
A plan has only one beneficiary. The account owner of a plan can change the beneficiary to a family member of the original beneficiary.
So, one could theoretically use a single plan for multiple children. Having separate plans per child may also yield greater state income tax benefits, if the state is one of the 18 states that provide a state income tax break with limits per beneficiary as opposed to limits per taxpayer. There are no annual contribution limits for plans, other than gift tax considerations. Some of the most important criteria for choosing a plan include:.
These criteria for selecting the best plan may lead to tradeoffs, where a superior rating along one dimension may correspond to an inferior rating along another dimension. For example, there is a tradeoff between return on investment and fees. The plans with the best return on investment may not necessarily have the lowest fees, or vice versa, so one has to evaluate the net return on investment after subtracting the fees.
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