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Determining the Best 529 Plan for You

What is a 529 plan?

A 529 plan is a tax-advantaged investment account that helps families save for college expenses. These plans are named after Section 529 of the Internal Revenue Code, which outlines the specific rules and regulations governing these accounts.

The largest majority of saving accounts in the US are 529 plans. (30 percent) On average, Americans have $28,953 in their 529 accounts.

The benefits of a 529 plan

Foremost, contributions to a 529 plan grow tax-free as long as they are used for qualified higher education expenses. This means that families can save more money for college by avoiding taxes on investment gains. Many states offer state tax deductions or credits for contributions to a 529 plan, which can help families save even more on taxes.

Some 529 plans allow you to change your investment options or beneficiary without penalty, while others may charge fees or limit your options. It's important to choose a plan that offers the flexibility you need in case the intended beneficiary doesn’t end up going to college. Funds from a 529 plan can be used at any accredited college or university in the United States, as well as many international schools.

Determining the best 529 plan for you


There are some key factors to consider when evaluating 529 plans. Where you live might have a say in the plan you pick. It's important to find out whether your state offers a tax deduction or credit for contributions to its 529 plan. Some states offer tax incentives for contributions to their plans, while others offer incentives for contributions to any state's 529 plan. If your state offers a tax benefit, it may be helpful to choose that plan.

Consider the investment options and fees associated with each plan. 529 plans typically offer a variety of investment options, including age-based portfolios and individual fund options. “Look for plans that offer low fees and a diverse selection of investment options that align with your investment goals,” says, Gary W Isler senior vice president of David Lerner Associates. “Never put money in high-risk investments. A sensible middle ground of investing is the best advice. Ultimately, the best 529 plan for you will depend on your individual financial situation and goals. Consulting with a financial advisor can also help determine the best plan for your needs,” Gary W Isler mentioned. 

It's important to consider the reputation and track record of the plan administrator. Look for plans that are administered by reputable financial institutions with a history of strong performance and customer service. It's important to research and compare multiple 529 plans before deciding.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc.

This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.

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