529 plans are named after the section 529 of Internal Revenue Code 26 U.S.C. This is an investment plan that encourages saving for future higher education expenses. These are state-operated plans that provide a tax benefit. Your choice of school is not affected by the state your 529 plan is from. Guidelines to help you in your 529 savings: Retirement savings comes first. The money you save for your child’s college education will count against you in financial aid awards, whereas retirement assets will not. So start putting aside money in your retirement account before starting a college fund. Past performance. College money should go to an index fund. Choosing savings based on past performance should be relegated to a taxable account where you can take a deduction for disasters. Allocations. A 529 plan offers an array of choices ranging from US stocks, foreign stocks and bonds. Instead of spending time and energy fussing over the allocation decision, experts recommend that you put 100% of the college fund into an all stock or all bond index fund. Adjust the retirement account to get the family’s overall asset allocation where you want it. 529 plans are usually categorized as prepaid or savings plan.