# 529 Plans by State With college costs rising, starting a 529 plan early is one of the smartest financial moves you can make for your child. But should you use your state's plan or shop around? ## What is a 529 Plan? A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Named after Section 529 of the Internal Revenue Code, these plans offer: - **Tax-free growth**: Earnings grow tax-free - **Tax-free withdrawals**: For qualified education expenses - **State tax benefits**: Many states offer deductions or credits - **Flexibility**: Can be used for K-12, college, trade schools ## States with Tax Benefits ### Best for Tax Deductions: **New York** - Deduction: Up to $5,000 ($10,000 married) - Plan: NY's 529 College Savings Program - Notes: Direct-sold only **Illinois** - Deduction: Up to $10,000 ($20,000 married) - Plan: Bright Start 529 - Notes: Excellent tax benefits **Indiana** - Credit: 20% of contribution (max $1,500) - Plan: CollegeChoice 529 - Notes: Credit beats deduction **Pennsylvania** - Deduction: Full contribution amount - Plan: PA 529 - Notes: No cap on deduction ### States with No Income Tax (No State Benefit): - Florida - Texas - Nevada - Washington - Tennessee - New Hampshire If you live here, shop nationally for lowest fees. ## Top-Rated Plans (Regardless of State): 1. **Utah My529** - Low fees: 0.10%-0.18% - Strong performance - Age-based options 2. **Vanguard 529 (Nevada)** - Ultra-low fees - Broad diversification - Simple investment options 3. **New York 529** - Low fees + tax deduction - Good for NY residents ## Should You Use Your State Plan? **Yes if:** - Your state offers tax deductions/credits - The fees are reasonable (<0.50%) - You're happy with investment options **No if:** - No state tax benefit - High fees (>0.75%) - Poor investment performance ## Getting Started 1. **Research your state's plan** at savingforcollege.com 2. **Compare fees and performance** 3. **Consider tax benefits** vs lower fees 4. **Start with age-based portfolio** 5. **Set up automatic monthly contributions** ## How Much to Save? - **Modest goal**: $100/month from birth = ~$35,000 at age 18 - **Aggressive goal**: $500/month = ~$175,000 - **Realistic**: Start with what you can, increase over time Remember: Any amount helps. The power of compound growth means starting early beats starting big.