529 plans are a solid choice for college saving. But how do you begin? First, look into your own state's plans, review management fees, tax breaks, and investment options. Consider direct-sold plans for lower rates. Remember that other states might have lower fees and better investment choices, so you may want to choose an out-of-state plan. Next, decide on your level of involvement. Age-based plans adjust automatically as your child gets older and allow you to be hands off while ensuring the best level of risk.
Keep an eye on your fund choices, do annual checkups, and look out for changes in rules and rates. Finally, decide on when and how to remove funds. To simplify tax records, you can have your withdrawals sent directly to your childâ€™s college. It is important to comply by IRS rules to ensure tax-free withdrawals. Only withdraw enough funds to be used in one calendar year at a time. Also, keep your receipts for tuition, room, board, and fees as proof should the IRS question the use of funds.