Should I choose NJBest or another 529 Plan?

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 Q. I read years ago that New Jersey’s 529 Plan, NJBest, wasn’t the best when it came to all the plans that are out there. How does it compare to other plans, and is there any tax advantage to using this plan instead of one from another state?

A. NJBest is the New Jersey 529 plan, but parents can invest in the plan of any state for their future students.

NJBest does offer a tax-free scholarship for New Jersey students who attend school in the state, with a maximum of $1,500.

But of course, when choosing a 529 Plan when your child is young, you have no idea what schools your future student will go for.

Another criticism of NJBest is that it doesn’t offer the same tax advantages as some other state plans do for residents of those states, such as the ability to deduct contributions from your state tax bill.

While NJBest’s performance has improved in recent years, some advisors say it’s not enough.

“We believe NJBest is lacking when it comes to its offering of investment options — only offering global large company stocks and bonds — as well as charging high expense ratios on funds used in the moderate age-based allocation,” said Bryan Smalley, a certified financial planner with RegentAtlantic Capital in Morristown.

“The expense ratios range from 72 basis points to 95 points for NJBest, while there are other plans such, as the direct sold plans at Utah or Michigan are less than half of that,” Smalley said.

Smalley said the limited investment options, the higher expense ratios and the lack of a tax deduction for New Jerseyans adds up to three strikes against NJBest.

“I believe that the better plans are the Utah and Michigan 529 plans,” he said. “With more diverse investment options and lower expense ratios on investments, I believe that these plans are superior to NJBest and should better serve college savers over the long term.”

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This story was first posted in November 2014. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.