Best 529 Plans

Turn your college savings into a tax-free investment

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A 529 plan is a great way to invest money that can later be withdrawn tax-free to pay for your children’s or grandchildren’s college education. With the average cost of tuition for a private school around $35,087 per year, setting aside funds for college is about investing your money rather than simply saving it.          

Every state offers its own 529 plans, giving you plenty of options to choose from. However, each plan varies in how well it performs, the number of investment options it offers, and what tax breaks it gives to state residents.

We reviewed over a dozen 529 plans based on performance, fees, investment options, and more to help you find the best investment. Here are our top five picks.

Best 529 Plans

Best Overall : CollegeAdvantage


CollegeAdvantage

CollegeAdvantage

Why We Chose It: Ohio’s CollegeAdvantage 529 took our spot for best overall because it is one of the highest-rated 529 plans and offers a variety of investment options as well as low fees.

What We Like
  • Age-based and customized investment portfolios

  • FDIC-insured investment options available

  • $4,000 deduction per child for Ohio taxpayers

What We Don’t Like
  • $462,000 maximum contribution limit

Ohio’s CollegeAdvantage 529, which earns a Silver rating from analyst website Morningstar tops our list as the best overall because it offers a variety of ready-made age-based portfolios that can either be actively or passively managed and become less risky as your child gets older. They also offer ready-made risk-based portfolios managed by Vanguard with options that allow you to invest based on your risk tolerance. CollegeAdvantage’s asset-based expense ratios for age-based options range from 0.17% to 0.30% annually and static and individual options under 0.49% (as of January 2021).

You can also build your own portfolio with a mix of cash, stocks, bonds funds, and FDIC-insured choices to suit your risk tolerance. And if you have a financial advisor, you can work with them on your CollegeAdvantage plan.

CollegeAdvantage’s 529 plan has no enrollment fee or annual account maintenance fee and only has a 0.13% manager fee and a 0.02% state fee. The plan also requires an initial investment of only $25 and offers up $4,000 in annual state tax deductions per beneficiary for Ohio residents.

The beneficiary of CollegeAdvantage's 529 does not need to live nor attend college in Ohio.

Best For Low Fees : ScholarShare 529


ScholarShare 529

ScholarShare 529

Why We Chose It: California’s ScholarShare 529 ranks as our best for low fees because the plan offers various investment options, reasonable asset-based fees, and no application, cancellation, or transfer fees.

What We Like
  • No state residency requirements

  • No application, cancellation, or maintenance fees

  • $529,000 maximum contribution limit

What We Don’t Like
  • No FDIC-insured options

Califonia’s ScholarShare 529 tops our list as the best for low fees since it charges no application, cancellation, change-in-beneficiary, change-in-investment-portfolio, or transfer fees, as well as no loads or sales charges and no commissions. Its annual asset-based fees also range from 0% to 0.52% (as of March 2021), and you can open and contribute to an account with any dollar amount. ScholarShare also earns a Silver rating from analyst website Morningstar. 

ScholarShare offers various flexible investment options, including enrollment year, guaranteed, multi-fund, and single-fund investment portfolios. Although its investments include funds from TIAA-CREF, T. Rowe Price, and more, it doesn’t offer an FDIC-insured option. Finally, although contributions are not deductible for California income tax purposes, earnings accrue free of state income tax.

ScholarShare also offers various resources on its website to make understanding 529 plans, investing, risk management, and more a lot easier. You can also apply directly on the website, set up recurring contributions from your bank account or by payroll direct deposit, or manage your investments all online. ScholarShare’s asset-based expense ratios for age-based options range from 0.08% to 0.52% annually and static and individual options under 0.53%.

Best For Performance : Oregon College Savings Plan


Oregon College Savings Plan

Oregon College Savings Plan

Why We Chose It: Oregon College Savings Plan ranks as our best for performance because it offers a variety of enrollment and static portfolio options as well as FDIC-insured options and competitive returns since inception on its investment portfolios.

What We Like
  • No state residency requirements

  • Competitive historical performance

  • FDIC-insured investment options available

What We Don’t Like
  • $400,000 maximum contributions limit

  • Various service-based fees

The Oregon College Savings Plan earns our top spot as the best for performance because its reported returns since inception on its investment portfolios range from 1.26% to 21.98%. It also earns a Silver rating from the analyst website Morningstar.

The Oregon College Savings Plan offers a variety of College Enrollment Year Portfolios that automatically move to more conservative investments as the beneficiary ages and static portfolios managed by TIAA-CREF, T. Rowe Price, and others plus FDIC-Insured options. 

Although the Oregon College Savings Plan charges no enrollment or maintenance fee, it does require a $25 minimum investment and an annual investment fee of 0% to 0.466% depending on the portfolios you’ve chosen.

The Oregon College Savings Plan also offers several easy savings tools and features on its website. You can set a savings goal, track your progress, and set up a gifting page that can be shared directly with friends and family or on social media.

Oregon College Savings Plan’s asset-based expense ratios for age-based options range from 0.30% to 0.33% annually and static and individual options under 0.70%.

Best For Customizable Plans : my529


my529

my529

Why We Chose It: Utah’s my529 was chosen as our best for customizable plans because it offers 13 different investment options, including two customized options with no minimum contribution or balance required.

What We Like
  • No state residency requirements

  • No minimum contribution or balance

  • $500,000 maximum contribution limit

What We Don’t Like
  • Operating expense and administrative fees

Utah’s my529 plan offers four age-based and seven static investment options plus two customizable investment options, making it our choice as the best for customizable plans. It also boasts an impressive Gold rating from analyst website Morningstar.

The age-based options available from my529 automatically reallocate account funds as the beneficiary ages and include FDIC-insured accounts. Although its static options don’t change allocations with age, the plan also allows you to choose customized age-based or static options to fit your needs. As with many 529 plans, my529 lets you change your investment option twice a year.

Although my529 charges no enrollment fee and requires no minimum contribution or balance for its investment accounts, it does charge an annual administrative fee ranging from 0.100% to 0.120% (as of March 2021). Asset-based expense ratios for age-based options range from 0.14% to 0.165% annually and static and individual options under 0.52%. Utah residents also get a 5% tax credit per beneficiary per year. 

You start your my529 account online and choose your investment strategy using the plan’s website, all with no fee or initial contribution required.

Best For Investment Options : Bright Start


Bright Start

Bright Start

Why We Chose It: Illinois’ Bright Start 529 plan ranks as our best for investment options because it offers generous tax deductions for Illinois taxpayers as well as six age-based and 22 static and individual portfolio options.

What We Like
  • No state residency requirements

  • Three different investment types

  • Investment options from 16 funds

What We Don’t Like
  • No FDIC-insured options

  • $400,000 maximum contribution limit

Illinois’ Bright Start 529 plan allows anyone to save up to $450,000 in college funds by choosing from 28 investment options, including age-based and static/individual portfolios, making it our top pick as the best for investment options. It also boasts an impressive Gold rating from Morningstar.

Bright Start offers many investment options across three broad types, including six age-based portfolios that automatically adjust based on the beneficiary’s age, six target portfolios that remain constant over time, and 16 individual portfolios you can tailor to your risk tolerance. Age-based and target portfolios utilize either Vanguard funds or a multi-firm strategy, including T. Rowe Price, DFA, Vanguard, Dodge & Cox, and others.  

Bright Start charges no enrollment or maintenance fees and requires only a $25 minimum investment to get started. It does, however, charge a 0.08% program management fee and 0.03% state administrative fee. Asset-based expense ratios for age-based options range from 0.12% to 0.45% annually and static and individual options under 0.83% (as of January 2021). Illinois taxpayers can also take a $10,000 deduction per individual taxpayer or $20,000 for a married couple filing jointly.

Final Verdict

CollegeAdvantage comes in as our top pick as the best 529 plan overall due to its combination of high performing investing options and low fees. However, the plan can’t touch ScholarShare for fees since the latter charges no application, cancellation, change-in-beneficiary, change-in-investment-portfolio, or transfer fees.

Oregon College Savings Plan takes the spot for the best overall performance due to its competitive performance history, and multi-firm investment, and FDIC-insured options. 

In terms of options, my529 ranks the best for customizable plans with 13 different investment options including two customized options. In comparison, Bright Start wins the best for investment options spot with a stunning 28 investment options offered from 16 funds.

Compare Providers

Plan Why We Picked It Notable Features
CollegeAdvantage Best Overall High-performance history and low fees
ScholarShare Best For Low Fees Reasonable asset-based fees and no application, cancellation, or transfer fees
Oregon College Savings Plan Best For Performance Competitive historical performance with FDIC investment options
my529 Best For Customizable Plans 13 separate investment options including two customized options
Bright Start Best For Investment Options 28 investment options from 16 funds

FAQs 

What Is a 529 Plan?

A 529 plan is a savings plan that allows parents to build savings through investments that can be used to pay for college expenses, such as tuition and other college-related costs. It differs from other savings plans in that funds can be added or withdrawn tax-free and the plan can only be used for college expenses.

There are generally two types of 529 plans. The first is an education savings plan that allows you to put funds into an investment account later withdrawn for eligible school expenses. The second is a prepaid tuition plan that lets you purchase tuition in advance and lock in the current rate.  

Is It Easy to Open a 529 Plan?

While anyone can open and contribute to a 529 account, parents and grandparents typically establish them for their children and grandchildren. In some states, people who contribute to the fund are eligible for tax deductions.

Although every state (including the District of Columbia) offers a 529 plan, most are available to any U.S. resident, regardless of what state they’re in. With that said, purchasing a 529 plan in your state may give you tax advantages you wouldn’t get from a plan outside of your state.

Signing up for a 529 plan usually involves visiting a provider’s website and starting the enrollment process. You will also need to select your investment options and make a minimum initial investment, depending on the plan.    

What Expenses Can a 529 Plan Be Used For?

Funds from 529 plans can be withdrawn tax-free to pay for eligible college or graduate school expenses, including tuition, room and board, a computer if the school requires it, and books and supplies. 

Any withdrawals from a 529 plan that are not used for eligible expenses are subject to taxes and a 10% withdrawal penalty. 

What Are the Tax Benefits of a 529 Plan?

The biggest advantage of a 529 plan over other types of savings and investment plans is that your funds are exempt from federal and state income taxes as long as you use them for qualified educational expenses. While your contributions aren’t tax-deductible, 35 states offer tax deductions or credits for contributions made by their residents.

Should I Open a 529 Plan for My Child?

Opening a 529 plan is one of the best ways to secure a college education for your children or children. Because you will be funding a savings account over a long period of time, the tax benefits you receive mean you will be getting more for your investment. However, it’s important to start early as you may be charged fees for withdrawing funds early.

One thing to keep in mind is that a 529 plan may impact a student’s eligibility for financial aid, so it’s essential to have enough funds set aside to help and not hinder their education.    

Are There Minimum Investments for 529 Plans?

Some states have a minimum investment requirement for residents who want to start a 529 account. These amounts typically range from $15 to $1,000. For example, many of the plans we reviewed have an initial investment requirement of $25.  

What Are the Fees Associated With 529 Plans?

Some 529 plans have no cost, while others charge an administrative fee of 0.25% or more. You may also have to pay application and cancellation fees as well fees for making changes to your investment.

Depending on the type of investment you choose, the firms that manage 529 plans may take a percentage of these services’ assets. These asset-based fees can range from a fraction of a percent to 0.75% and more.

How We Chose the Companies for Best 529 Plans

We looked at over a dozen 529 plans for this review. Our first consideration was to find plans with a strong history of performance and low fees. Next, we looked at the range of investment options to allow parents to choose their risk level.

Although we made sure to find 529 plans that anyone could start in any state, we also looked at plans that offered generous state deductions for their own residents.

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Article Sources
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  1. U.S. News & World Report. See the average college tuition in 2020-2021.

  2. Morningstar. The Top 529 College Savings Plans of 2020.