Q&A: How do I choose the best college savings program?
Q: My husband and I are ready to start investing in a 529 college savings plan for our child. Do you recommend that we go with the one offered by the state where we live, New York, or choose the best performer from another state?—A.D., Eastchester, N.Y.
A: One benefit of the New York plan is that residents get a deduction on their state income tax of up to $5,000 for a single taxpayer or $10,000 for a couple filing jointly. You won’t get the deduction if you put the money in another state’s plan, though all 529 plans allow your money to grow tax deferred, and withdrawals are not subject to federal income taxes as long as they’re used for qualified higher-education expenses.
If you don’t care about the state tax deduction, you can compare all of the state plans at www.savingforcollege.com or search for “529 plans” at morningstar.com.
Regardless of the plan you choose, consider contributing regularly by payroll deduction or by automatic withdrawals from your checking account. Check our guide to saving for college for more information.