We were poking around on medical moms blogs when we came across this comment from reader Ana. She said she wanted to just be told what to do with 529 plans because she’d hit the paradox of choice and everything was all complicated.
The post was almost a month old so we felt silly for replying to it there, so we figured we’d reply to it here and hope that Ana saw it.
Also: a disclaimer. We’re not financial advisers. Take our “advice” such as it is at your own risk.
Step 1: Check to see if you live in one of these states that offer tax breaks for 529 contributions.
1a. If you do, then go with your state’s 529 plan.
1b. If you don’t, then go with Utah. There are some other 529 plans that are now just as good as Utah’s but Utah’s has always been ranked among the top and we hope will continue to be ranked so.
Step 2: Pick a plan company within the plan.
2a. If Vanguard is one of your options, go with that.
2b. If not, then look at the fees. Pick one with low fees.
Step 3: Pick a fund from your choices.
3a. You want to look for terms “age-based”, “life-cycle” or “target-date”.
3b. If there are multiple choices among these options, then it doesn’t really matter which one you pick. They’ll be different in terms of risk and possibly fees. You’ll again want to focus on the lowest fee plan first. If your kids are little, more risk is better, if they’re closer to college, less risk is fine. Don’t worry about the risk if you can’t decide– flip a coin or something. It’s better to pick something randomly than to pick nothing at all because you’re worried about getting the “best”.
So, if you’re in a state that doesn’t give a tax advantage, you want the Utah UESP Vanguard Age-Based Aggressive Global fund. And you’re done. If you’re in another state we’d be happy to poke at their options for you.
Put in what you can. We like putting some away automatically each month. Something is better than nothing.
Are you saving for your kids’ college? How?