5 Tips for Buying a 529 College Savings Plan

If you have children, it is essential that you start saving for college as soon as possible. This should happen when your child is born but if you have not done that yet, start immediately. This will give you as much time as possible to save so that you can also take advantage of extra years of appreciation of principal. This article will look at why a 529 college savings plan is advantageous to you and five tips to buying the best one for you. 

One of the ways to keep more money in your 529 plan is to buy a plan without any commissions. When you are examining different college savings plans, choose one without commissions or with low commissions and low annual fees, if there are any annual fees. These will impact how much money you will have when your child ends up going to college. There may be an annual asset management fee or potentially yearly maintenance fees. Be sure to compare several different plans so that you can make the best possible choice. 

Another tip when buying a 529 plan is to figure out what you are comfortable with. Most 529 plans will invest in the stock market so this is something to keep in mind. Some people are uncomfortable with the volatility of the market and this is fresh in many people’s minds because of the decline that has happened within the past year. 

You may want to ask whether or not the 529 college savings plan qualifies you for any deductions. There can sometimes be deductions taken on your state income tax if you purchase a plan which is sponsored in your state of residence. This may not be an important reason to buy because you want to buy based upon the quality of a plan. It could be an important side feature if you are divided between two plans. 

If you purchase stock through the 529 plan, you will want to be aware of what class shares are being purchased. There normally are three different classes of shares: classes A, B, and C. The type of share that you purchase will dictate how fees will be paid. Class A shares normally charge an upfront fee (load) of a certain percentage with lower fees while class B shares often have a back-end fee and class C shares could have either a front-end load or back-end load. This will go back to understanding the charges you will face and being comfortable with them. 

Be sure that you give yourself enough time to save within the 529 plan. If your child only has four years until college, it may not be worthwhile to put money into a 529 college savings plan. You cannot guarantee that your principal will be completely whole, given that time period. 

Saving for college will take some discipline. You can set up the 529 college savings plan to have monthly deductions so that you are consistently saving. It is beneficial because of the tax advantages and using these 5 tips enclosed here can help you choose the best plan for you.