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How 529 Plans Work


State-to-State Variations

Because each state can control some of the features of its own plan, there are variations from state to state. Most plans follow the same general scheme (and federal requirements), but make sure you compare plans among states other than your own. Also, some states offer multiple plans which can differ from each other, so make sure to compare those too.

There are no residency requirements on 529 plans. You can invest in any state's plan, whether you live there or not, and you can draw funds from the plan to pay for college in any state, whether it's in your home state, the plan's home state, or some other state. Some states do require non-residents to work through financial advisors or brokers to buy into their plans, and that can add some costs to the plan.

CollegeSavings.org offers a comprehensive comparison tool that lets you see which plans are available in which state, and compare their features.

In the next section, we'll look at some of the things that make the 529 plan so attractive.