college

529 savings plans

Finding a fruitful plan

A state-by-state listing of programs can be found at Bankrate's interactive locator. Savingforcollege.com, also provides a 529 Evaluator that lets you compare 529 plans by cost and several other categories.

Expenses: Keep in mind that annual expenses also could vary widely within a single college savings plan. It all depends on the investments you choose.

Loads: You'll see the biggest swing of investment costs within a single plan when you select a college savings plan that charges initial or deferred sales loads.

With an initial sales load you pay a fee as soon as you purchase an investment option.

Let's say you invest $10,000 in a mutual fund with an initial sales load of 5 percent. The fee is $500, so only $9,500 actually makes it into the mutual fund.

With a deferred sales load, you're charged a fee after you withdraw money from an investment. This fee gets lower and lower the longer you hold on to an investment.

Many financial advisers encourage parents to avoid 529 plans that charge load fees. With such a short time horizon to save for college, 18 years and often much less, it's important to keep your investment expenses as low as possible.

Low-cost plans: Looking for a low-cost 529 plan? A state-sponsored 529 plan managed by TIAA-CREF or Vanguard are good places to start. These plans offer a diverse set of investment options at a low price.

When it comes to studying the costs of a 529 plan, take your time and make sure you understand all the details.

The key thing you're looking for is a low-cost 529 plan with a diverse set of investment options. Try to stay with annual expenses of 1 percent or less. Any plan with annual expenses that exceed 1.3 percent should be considered on the pricey side.

Families looking to steer clear of high fees will want to pass on broker-sold 529 plans. A broker-sold 529 plan could be two or three times more expensive than a 529 plan offered directly from a state. In general, direct-sold plans have lower costs.

Staying in state

Before studying 529 plans from across the country, be sure to take a hard look at the college savings plans available in your state. The reason? Your state may offer some pretty substantial state tax incentives and other benefits for choosing one of its 529 plans.

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