Why you’re using the wrong method to pick your college savings plan

Personal finance

The in-state tax break you get for opening that college savings plan may not be worthwhile if high plan costs are devouring your cash.

More than 30 states, plus the District of Columbia, offer state tax breaks to residents for contributions to a 529 plan — the college savings account families use to save and pay for education on a tax-free basis.

Indeed, 45 percent of parents said in-state tax incentives were a factor in their 529 plan selection, according to a survey from Strategic Insight.

But as convenient as it may be to invest in your state’s plan just for the tax break, some experts actually warn against it.

Other things matter, too, especially now that the Tax Cuts and Jobs Act allows families to tap a 529 plan to cover up to $10,000 in private elementary and high school expenses each year.

As of the end of last year, 529 prepaid and savings plans held $319 billion in assets, Strategic Insight found.

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