Best 529 Plans of 2024

A 529 plan is an education savings plan with tax advantages. The legal term for these accounts is qualified tuition plans, but they get their name because Section 529 of the Internal Revenue Code authorizes them. States, state agencies and educational institutions can sponsor these plans.

As you search for the best 529 plans, know that there are two types: education savings plans or prepaid tuition plans. Some plans have state residency requirements while others restrict who can put money in the accounts and who the beneficiary can be. 

Account holders can choose from a range of investment options, including mutual funds and exchange-traded funds (ETFs). Some accounts provide an easier investment option using an age-based portfolio or target date portfolio that helps you save for a certain deadline when the beneficiary will likely begin using the funds. Generally, age-based portfolios offer diversified risk, getting less risky the closer the beneficiary gets to using the account. 

However, these investments are not federally guaranteed, though they might be insured by the Federal Deposit Insurance Corp. (FDIC). What that means is, you can lose money that you invest in an education savings plan.

The Overall Best 529 Plans:

• Best for employer-sponsored plan: SoFi
• Best for widely available 529 Plan: Vanguard
• Best for account with digital wealth manager: Wealthfront

Best 529 Plans for College Savings

You have several options when evaluating the best 529 college savings plans. Here’s a look at some of the leaders and what these accounts are best for.

1. Best for Employer-Sponsored Plan: SoFi

College savings plans are not common benefits listed for an organization. But with the SoFi 529 plan, employers can stand out with a unique offering. The plan offers an option for companies to provide contribution matching, much like they do with 401(k) plans. Using the simple tools, you can connect the plan to your human resources (HR) system for easy payroll deductions and administration.

2. Best for Widely Available 529 Plan: Vanguard

The Vanguard 529 plan is available to investors in all 50 states, which makes it an attractive option — especially if you move around frequently. The plan has low fees, though Vanguard has not continuously updated those fees to keep them as far below the market as they once were. Using the plan can help account holders get started with saving toward education needs without hiring a financial advisor to manage investments.

3. Best for Account with Digital Wealth Manager: Wealthfront

Wealthfront is a well-known robo-advisor. These accounts help you select investments based on your risk score or risk tolerance. The plan allows for easier investment options, though that comes with slightly higher fees than you might find with other plans. But for those who want to contribute the funds and know they are being well invested, it’s a strong option thanks to the digital wealth manager tools.

Best 529 Savings Plans by State

Here’s a look at the state-sponsored 529 plan options based on which state you live in.

Is a 529 College Savings Plan Worth It?

The best 529 accounts make it simple to save for future education expenses without paying taxes on the funds or their earnings once you pull the money from the account. The key to making the plan worth it is to select a good one that has low fees with good returns.

One aspect of the plan that you can’t account for is whether the child will go to college or enroll in a program that is approved for spending the funds tax-free. If the beneficiary does not attend a qualified education program, you can change the account beneficiary. This can be beneficial for people with multiple children. However, you can also transfer it to someone else, such as a niece or nephew.

Another option is to move the money to an Achieving a Better Life Experience (ABLE) account, which helps families care for family members with a disability. 

If none of those scenarios work out, you can withdraw the money and pay applicable income taxes as well as a 10% penalty for removing the money.

What Are the Disadvantages of a 529 Plan?

While a 529 savings account offers options for saving for education expenses, it does have some drawbacks. Consider these before relying on this account type.

• It offers fewer investment choices than a traditional investment account.
• Each 529 plan has its own characteristics and benefits.
• You’ll need to be careful to avoid penalties.
• Money in your 529 plan will count against your financial aid applications.
• Some plans have high fees, which make it more challenging to make your money grow
• If you don’t use the funds for educational purposes, you will pay taxes on the money and a 10% penalty

Tax-free Education Savings

While you’ll want to spend some time researching the best 529 funds, the effort can pay off in a big way when it comes time to pay for education. Making regular, scheduled contributions can also ensure you stay on track for education savings, even for K-12 education in some areas with some plans.