Money Magazine Says 529 Still the Way to Go
Money Magazine has a new article, just published on CNN.com, about 529 plans. It asks if 529 plans are still the way to go. The answer: absolutely, except in very rare circumstances:
The tax breaks usually make 529s unbeatable. Say you’re in the 28% tax bracket, have a five-year-old and save $200 a month in Utah’s low-cost 529, which has annual expenses of 0.38%. Assuming annual average returns of 5%, you’ll have $39,100 by the time your kid is 18. Invest the same amount in a taxable account with equal fees and returns, and you’ll have $36,200 after taxes. In other words, you’ll lose $2,900.
The 529 comes out even further ahead if your state allows you to write off all or part of your contributions (33 states and the District of Columbia will let you do that).