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Which 529 Plans Are Best?

Although several states have favorable options, savers should check the tax advantages of their own state's plans before putting money into an out-of-state vehicle.

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Adam Zoll: Laura, someone who is looking for the highest-quality 529 plans in the country--maybe they live in a state that does not give them a tax break or maybe there is no income tax at all, but they don’t get a tax break for contributing to their state's 529 plan. Therefore the field is open for them. Where should they be looking in terms of some of the best plans in the country?

Laura Lutton: Among our favorite plans, you see a nice variety of both, direct-sold and advisor-sold, and also active and passive management. For example we really like the T. Rowe Price plans that are run out of Alaska and Maryland. That’s an example where they're both direct sold. They've got great underlying investments, reasonable prices on active management, and just a very solid history in the 529 industry. Those would be two of our favorites; they are practically identical. So it doesn’t really matter if you are coming from out of state, like you mentioned, should you choose.

Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.