{"id":8652,"date":"2019-07-05T10:13:37","date_gmt":"2019-07-05T15:13:37","guid":{"rendered":"https:\/\/www.cainwatters.com\/digitalblogs\/?p=8652"},"modified":"2019-09-30T18:53:33","modified_gmt":"2019-09-30T23:53:33","slug":"choose-a-529-college-savings-plan","status":"publish","type":"post","link":"https:\/\/www.cainwatters.com\/digitalblogs\/choose-a-529-college-savings-plan\/","title":{"rendered":"Ask a CPA: I want to open a 529 College Savings Plan, but which state do I choose?"},"content":{"rendered":"<p>Congratulations on making the decision to start saving for college.\u00a0 Education savings plans allow family members to put money away for a future student&#8217;s tuition, fees, room and board, textbooks and other qualified higher education expenses.<\/p>\n<p>A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as \u201cqualified tuition plans,\u201d are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. Any earnings grow federal income tax deferred and may also be eligible for state tax deductions. Distributions for qualified education expenses are also federal income tax free.<\/p>\n<p>CPA and Financial Planner <span style=\"text-decoration: underline;\"><span style=\"color: #0000ff;\"><a style=\"color: #0000ff; text-decoration: underline;\" href=\"https:\/\/www.cainwatters.com\/jennifer-klein\/\">Jennifer Klein<\/a><\/span><\/span>, says that opening a 529 Plan is the easy part\u2014but with every state, and even many colleges offering their own plans&#8211; it\u2019s deciding <em>which to choose<\/em> that can be a bit overwhelming.<\/p>\n<p>\u201cIt\u2019s a common misconception that investors have to select their state of residency\u2019s program. It doesn\u2019t matter where you live or where the future student chooses to go to school, you should research the features and benefits of each plan and make the most advantageous choice for you,\u201d says Jennifer.<\/p>\n<p>All 50 states and the District of Columbia offer 529 college plans. The only benefit to sticking with your own state\u2019s plan is if it offers a deduction. For example, your contribution might qualify for a state tax deduction. (Of course, that&#8217;s only if your state has an income tax; some states do not.)<\/p>\n<p>Review the tax benefits in your state to determine whether they are a strong enough incentive to go with an in-state plan. Other states may have more attractive 529 options with lower fees and more investment choices. Jennifer recommends a side-by-side comparison tool like the one <a href=\"https:\/\/www.savingforcollege.com\"><span style=\"text-decoration: underline; color: #0000ff;\">SavingForCollege.com<\/span><\/a> features.<\/p>\n<p>You grow the money by selecting a portfolio of mutual funds and other investments. The earnings are usually tax-free, but you&#8217;ll want to see what a plan&#8217;s disclosures say about fees, because those can reduce your savings by 10% or more.<\/p>\n<p>Jennifer advises, \u201cMany have enrollment fees, account maintenance fees and program management fees. You should target a plan that has all-in account and investment fees under one percent.\u201d<\/p>\n<p>If you\u2019ve already been investing in Texas\u2019 plan, but feel like Utah is a better fit for you, it\u2019s never too late to transfer from one to another\u2014typically with no fee.<\/p>\n<p>Should you have left over funds, or the named beneficiary of the plan decides not to go to college or gets a scholarship, you have options with the account. You can change the beneficiary to another <span style=\"text-decoration: underline;\"><span style=\"color: #0000ff;\"><a style=\"color: #0000ff; text-decoration: underline;\" href=\"https:\/\/www.savingforcollege.com\/article\/who-is-a-member-of-the-family-of-a-529-plan-beneficiary\">qualifying family member<\/a><\/span><\/span> without tax consequences. Another option is leveraging for private K-12 education or savings for grandchildren. If you truly have no other use for your leftover 529 plan savings, you can always take a non-qualified distribution. Your contributions will never be taxed or penalized, since they were made with after-tax dollars, however earnings on your investment will be subject to income tax as well as a 10% penalty.<\/p>\n<p>Leveraging a 529 Plan is just one part of your overall wealth accumulation plan and can be a supplement to other long-term saving vehicles like 401(k) and Roth IRA plans. Want to make sure you are leveraging the right tax-advantageous saving vehicles? <a href=\"https:\/\/www.cainwatters.com\/contact\"><span style=\"text-decoration: underline;\"><span style=\"color: #0000ff; text-decoration: underline;\">Contact us today<\/span><\/span><\/a> for a complimentary consultation.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Congratulations on making the decision to start saving for college.\u00a0 Education savings plans allow family members to put money away for a future student&#8217;s tuition, fees, room and board, textbooks and other qualified higher education expenses. A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":8653,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[18,17],"tags":[],"ppma_author":[48],"class_list":["post-8652","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-planning","category-investing"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Ask a CPA: How to Choose a 529 College Savings Plan<\/title>\n<meta name=\"description\" content=\"CPA Jennifer Klein discusses which state is the best fit, fees to watch out for and more when it comes to picking your 529 College Savings Plan.\" \/>\n<meta name=\"robots\" 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