How to Pick a 529 Plan, Part 1

One of the common questions we get asked is “how do I open a 529 account for my son/daughter?” While it may seem scary to open an account, it is very simple. Follow our guidance to get set up quickly.

1) Use the table on the homepage to understand your options. Note: the link will open up a new tab. This will be a reference that you flip back and forth to as you follow the steps.

We will now walk through the key parts of the table in steps 2-3:

2) The first item is the filter. Use this to type in the state where you live and it will filter the list.

• Note: there are complex scenarios where a beneficiary (i.e. the child) lives in a different state than the account holder (e.g. you). These complex situations are beyond the scope of this article. Please set up a free 1:1 consultation to discuss your situation.

Image of a table filtered for the word “north”

3) The table has a few key columns:

• State: the name of the state (where the beneficiary lives)

• In-State Resident Benefit: A “Yes” indicates that this state offers a benefit that is only available to in-state resident beneficiaries. Typically, this benefit is a reduction in your state taxes. A “No” indicates that the state does not offer any benefits to in-state residents. In the example on this page, North Carolina does not offer a benefit to residents but North Dakota does (the benefit is a $5K deduction for single filers / $10K deduction for married folks filing jointly)

• New Account Benefit: A “Yes” indicates that this state offers a benefit for opening a new 529 account in the state’s 529 plan. Often, this takes the form of the state depositing a small amount into your 529 plan. For example, the state of Alaska will deposit $250 into new 529 accounts opened with the state’s 529 plan.

• Recommended Plan: This is our recommended plan. Follow the link to review your options. Often, if there is an In-State Resident tax deduction in the state in which you reside, it is often best to select your state’s plan. If your state does not offer a benefit, the default selection is the BrightStart plan operated by the State of Illinois.

4) Follow the link to go the recommended state plan. You can then review all the options that the state offers.

In our next article we will walk you through choosing a specific plan.