The process of narrowing it down to one plan can be daunting in case you’re contemplating the use of a Section 529 Plan. There are over sixty plans available to investors, and none of them are exactly alike. But then again, no two investors are exactly alike either! Choosing the right plan for you will ultimately come down to comparing the universal features among all the plans. You can make an informed decision about which plan best fits your unique financial situation by dentifying these features and how they vary from plan to plan. It’s important to remember that many states allow residents from out-of-state to use their plan. Even in case you have no intent of going to school in that state, this can be done. There’s an old saying that “No one works on Wall Street for free.” It’s no different with Section 529 plans. These plans may have anywhere from one to three layers of people who want to get paid for their role in managing or marketing the plan. The state will need to cover the administrative costs of providing a Section 529 plan naturally.

The right 529 plan section

This is usually incorporated into their management of the assets for prepaid tuition plans. or a Section 529 savings plan, it will be expressed as an annual program management fee (usually $25 -50 dollars) or as a percentage of assets (.25% per year). Some states charge both. The mutual fund company that manages the assets will also need to get paid for Section 529 savings plans. They charge an annual “expense ratio” on your money, depending on which mutual fund it is invested in. This fee can range from less than one-tenth of one percent, to over 2%. That huge swing in fees can have a dramatic effect on what you actually earn. Lastly, they will also have to get paid in case you buy your Section 529 savings plan through a broker. They are paid out of the expense ratio charged by the mutual fund company much of the time. But there are a number of plans that charge you a commission (or a surrender fee) if you purchase them through a broker. You should try to keep your combined annual expenses from all these categories under 1-1.5% as a rule of thumb. The cost will slowly chip away at your investment growth while the higher priced plans may offer you some great investment options or plan features. You’ll be better able to make an informed decision about which plan will serve you the best by comparing the common features among plans. Don’t get lured into using your state’s plan without looking at the others available to you. Likewise, don’t fall in love with a plan solely because it has high returns, without looking at the fees and restrictions associated with it.