(WMC TV) - A state-administered 529 plan ought to be the centerpiece of your child's college investment portfolio.
The money's earned and spent tax-free on any of your college student's eligible expenses, including tuition and books.
"You can use it not only for four-year colleges and universities, but also for community colleges, for vocational schools in some cases and also for graduate schools if your child goes to graduate school," said Consumer Reports Executive Editor Greg Daugherty.
You don't have to stick with your state's plan, either -- assuming your state offers one. In fact, I settled on Iowa's plan for my two children a long time ago, even though we have no interest in Iowa schools.
Based on my experience -- and on the advice of both Consumer Reports and consumer advocate Clark Howard -- you should shop 529 plans with:
* LOWEST EXPENSES. Fees? Charges? Contribution minimums?
* SOLID INVESTMENT SUPPORT. The plan should be partnered with a reliable, stable investment management company. I prefer the plans managed by Vanguard.
* PORTABILITY. That means one that can be spent on either public or private colleges, in-state or out-of-state universities.
* AGE-BASED DIVERSIFICATION. You match your child's current age with the plan, and it automatically adjusts its fund diversification over time.
"So it might start out a little more aggressive, then it gets more conservative so there is less chance of losing money as your child gets closer to the time when you will be writing those checks," Daugherty said.
Clark Howard's 529 Guide is the best resource on the web for researching states' 529 plans.
Howard's done the homework for you. He's even declared which plans he believes are the best in the country.
He's also posted an "honor roll" of the plans with links to their respective web sites.