Best 529 Plans of 2024

529 plans are a great way to save for education expenses. Benzinga found that 529 plans with SoFi, Vanguard and Wealthfront have the best return.

A 529 plan is an education savings plan with tax advantages, offered by states, state agencies and educational institutions. The legal term for these accounts is qualified tuition plans, but they get their name because Section 529 of the Internal Revenue Code authorizes them.

As you search for the best 529 plans, know that there are two types: education savings plans or prepaid tuition plans. Some plans have state residency requirements while others restrict who can put money in the accounts and who the beneficiary can be.

This tax-advantaged investment account allows investors to choose from a range of investments, including mutual funds and exchange-traded funds (ETFs). Some accounts offer age-based portfolios that adjust the level of risk based on the beneficiary's age and savings goal deadline. However, these investments are not federally guaranteed, though they might be insured by the Federal Deposit Insurance Corp. (FDIC). What that means is, you can lose money that you invest in an education savings plan.

While all 529 plans offer tax benefits, some are better than others in terms of fees, investment options and performance. Benzinga explores some of the best 529 plans available to help you make the most of your college savings.

The Overall Best 529 Plans:

• Best for Employer-sponsored Plan: SoFi
• Best for Widely Available 529 Plan: Vanguard
• Best for Account With Digital Wealth Manager: Wealthfront

Best 529 Plans for College Savings

You have several options when evaluating the best 529 college savings plans. Here’s a look at some of the leaders and what these accounts are best for.

1. Best for Employer-Sponsored Plan: SoFi

College savings plans are not common benefits listed for an organization. But with the SoFi 529 plan, employers can stand out with a unique offering. The plan offers an option for companies to provide contribution matching, much like they do with 401(k) plans. Using the simple tools, you can connect the plan to your human resources (HR) system for easy payroll deductions and administration.

Why We Love It: SoFi 529 plan offers employers an opportunity to provide a unique and valuable benefit to employees. By offering this tax-advantaged savings account for education expenses, employers can support their team members in their pursuit of higher education.

2. Best for Widely Available 529 Plan: Vanguard

The Vanguard 529 plan is available to investors in all 50 states, which makes it an attractive option — especially if you move around frequently. The plan has low fees, though Vanguard has not continuously updated those fees to keep them as far below the market as they once were. Using the plan can help account holders get started with saving toward education needs without hiring a financial advisor to manage investments.

Why We Love It: With its tax benefits, low fees, investment options, and flexibility, Vanguard 529 plan can help ensure that your child has the financial resources they need to pursue their academic goals.

3. Best for Account with Digital Wealth Manager: Wealthfront

Wealthfront is a well-known robo-advisor. These accounts help you select investments based on your risk score or risk tolerance. The plan allows for easier investment options, though that comes with slightly higher fees than you might find with other plans. But for those who want to contribute the funds and know they are being well invested, it’s a strong option thanks to the digital wealth manager tools.

Why We Love It: Wealthfront's 529 plan provides a simple and effective way to save for your child's education. With risk-based portfolios that are managed for you and automatic contributions, it's easy to sit back and watch your investments grow.

Best 529 Savings Plans by State

Here’s a look at the state-sponsored 529 plan options based on which state you live in.

Is a 529 College Savings Plan Worth It?

The best 529 plans make it simple to save for future education expenses without paying taxes on the funds or their earnings once you pull the money from the account. The key to making the plan worth it is to select a good one that has low fees with good returns.

One aspect of the plan that you can’t account for is whether the child will go to college or enroll in a program that is approved for spending the funds tax-free. If the beneficiary does not attend a qualified education program, you can change the account beneficiary. This can be beneficial for people with multiple children. However, you can also transfer it to someone else, such as a niece or nephew.

Another option is to move the money to an Achieving a Better Life Experience (ABLE) account, which helps families care for family members with a disability. 

If none of those scenarios work out, you can withdraw the money and pay applicable income taxes as well as a 10% penalty for removing the money.

What Are the Disadvantages of a 529 Plan?

While a 529 plan offers options for saving for college, it does have some downsides. Consider these before relying on this account type.

• It offers fewer investment choices than a traditional investment account.
• Each 529 plan has its own characteristics and benefits.
• You’ll need to be careful to avoid penalties.
• Money in your 529 plan will count against your financial aid applications.
• Some plans have high fees, which make it more challenging to make your money grow
• If you don’t use the funds for educational purposes, you will pay taxes on the money and a 10% penalty

With these drawbacks in mind, some alternatives to 529 plans you may consider include high-yield savings accounts, long-term CDs or Roth IRAs.

Tax-free Education Savings

While you’ll want to spend some time researching the best 529 funds, the effort can pay off in a big way when it comes time to pay for education. Making regular, scheduled contributions can also ensure you stay on track for education savings, even for K-12 education in some areas with some plans.