529 College Savings Day is on 5/29/2106, get it 5-29. In honor of the day, this post is all about picking the best 529 plan for you to save for your children’s college education. Before I get into it, there’s one important piece of information to go over.
Retirement savings comes first!
If you’re not saving all you can for retirement or haven’t started at all, then you shouldn’t be putting money aside for college. When you don’t have cash saved for retirement, you can’t afford to pay for your child’s college education. It sounds harsh, but it’s the truth. First, get your goals and savings set to ensure you can financially support yourself in retirement before you begin squirreling it away for your kid to attend college.
No that I’ve gotten that off my chest—start planning for college savings by first deciding what you want to pay. Is it for every expense they have in college? Just room and board? Or is it tuition and books? Knowing what your expenses will be in the future will help you plan. It also gives you the opportunity to let your kids know, from a young age, what their financial responsibility will be for education. It may seem like it’s now the standard for every parent to pay for their kids’ entire college experience but in reality, that is not the case for many families. Know what works best for your family. Now, on to the nuts and bolts of it.
The best 529 plan for you.
A 529 plan is a state-sponsored program to save and invest money for a child’s college education in a tax-advantaged account. That means if you are saving money for college in a 529 plan, the earnings will be tax-free if used for qualified education expenses.
Now, a 529 plan may be something you’ve heard of before or that it’s wise to save for college. The problem most people have is knowing which state-sponsored plan is the best 529 plan to sign-up for. No worries, I’m going to give you some links to help in the decision-making process.
First up is a Forbes article by William Baldwin. I like it because not only does he agree with me that you should do retirement savings first but also because he breaks down the good and bad state 529s using handy color-coded U.S. maps to let you know the better plans. Even sweeter they’re broken down based on when you start saving for your kid’s education, i.e. as a baby or a teenager. All-in-all a great article to read if you need to know which state’s 529 plan to choose.
This post on SavingForCollege.com has their ranking of the best states for 529s. They also have a list of the states holding 529 giveaways to celebrate 5-29. You may be able to win some money to start or add cash to your college savings!