What’s the Best Account for College Savings?

By Chana R. Schoenberger Sept. 4, 2017

Is it a 529, a brokerage account or a UGMA? We answer that question—and others—about college financing.

What’s the best type of account to use when saving for college—a “529,” a brokerage or savings account, or a UGMA?

“If saving for college is the goal, then a 529 plan will usually be the best option for four key reasons,” says Kyle Ryan, a certified financial planner who is head of advisory services at Personal Capital, a digital wealth manager based in San Carlos, Calif.  These state-sponsored accounts, which invest in mutual funds, offer tax-free growth and withdrawals when used for qualified higher-education expenses, Mr. Ryan says. Each state has a plan, and many also offer state-tax benefits to residents who open a local account.

The accounts are controlled by the designated owner and, when owned by a parent, are considered parental assets when calculating financial-aid eligibility, Mr. Ryan says. Fees are typically low, which matters especially over a long period, such as the decades it takes to save for college.

Brokerage accounts offer more investment choices than most 529s. Parent-owned brokerage accounts don’t grow tax-free, however.

See the full article here: https://www.wsj.com/articles/whats-the-best-account-for-college-savings-1504577220