Posted: November 19th, 2009 | Author: Joe | Filed under: Saving | Tags: 529 savings plan, Best, college savings | No Comments »
This list is from Kiplinger’s personal finance magazine “Best Of” edition.
Best 529 for low fees.
Kiplinger’s pick: Illinois’ Bright Start College Savings program. It’s no surprise that this plan is run by Vanguard, since they are known for their rock bottom fees.
Best 529 plan for fund selection.
Kiplinger’s pick for 529 plan with the best fund selection goes to the College Savings Plan of Nebraska. This 529 offers 20 funds to choose from. It’s unclear from the article however whether this fund has the most funds to choose from, or the best funds to choose from.
Best 529 plan sold by a broker.
If buying shared in your 529 college savings plan is important to you, then Kiplinger recommends Virginia’s CollegeAmerica plan, which offers 22 funds from American Funds.
Best 529 for maximizing your savings.
If you live in a state that offers a tax deduction on your 529 contributions, then you should start by investigating the 529 plan offered by your state of residence. If the plan is a truly rotten one, then you may still be better off using a different state’s plan, but it may be difficult to make up for the tax break depending on your personal tax situation.
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Posted: September 5th, 2009 | Author: Joe | Filed under: Investing, Saving | Tags: 529 savings plan, college savings, Investing, Taxes | No Comments »
529 college saving plans are tax deferred investment accounts that are a lot like a 401(k) plan except instead of saving for retirement, you’re saving for college. Just as with 401(k) plans, some 529′s carry a wide assortment of investment options to choose from and this can sometimes get complicated.
But for most people, a 529 saving account is pretty straightforward. Most experts recommend you select an age-based fund that gradually shifts from a more aggressive stock heavy portfolio to a more conservative bond or cash heavy portfolio as high school graduation nears. It’s also common advice to go with your in-state plan, as most states offer a tax deduction for the amount of money contributed to the plan.
But common sense, and conventional wisdom are not always absolute.
For example, the state tax deduction for contributions only makes sense if you live in a state that collects income tax. If you’re lucky enough to live in a state that has no income tax (like Florida or New Hampshire), then you’re not really benefiting from that part of the plan.
There’s more wrong with conventional advice when it comes to 529 plans.
Many 529 plans offer age-based options that are similar to target-date options found in many 401(k) plans. But age-based options carry the same risk as target-date funds that hi-lighted by the After Hours Investing blog post Beware Target-Date Funds! . Namely, age-based funds carry non-uniform risk.
SmrtMoney examined performance of 529 plans during the 2008 market crash, and they found some problems.
Some age-based plans targeting high school seniors lost 30% while others gained 4%. How can this be? Aren’t age-based funds supposed to gradually adjust assets over time specifically to avoid such risk?
Well, just like target-date funds, the fund managers of some 529 plans got greedy. Some plans had 50% or more of their assets in stocks! This is way too much risk for a high school senior who will need that money in a year or less. According to Cleveland based financial advisor Scott Snow, an age-based fund for high school seniors should have no more than 20% in stocks.
This should serve as a reminder to all who investing for college in a 529 plan: know where your money is. If your account holds age-based funds, check on the underlying holdings and make sure the risk is in line with the time till graduation.
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Posted: August 29th, 2009 | Author: Joe | Filed under: Investing | Tags: 529 plans, college savings, Investing, Taxes | No Comments »
According to SmartMoney Magazine, a recent survey found that 90% of parents are worried about affording to send junior to college. It’s not surprising since increasing college costs are one of the few constants in the universe – even in times where people are seeing their paychecks slashed and asset values diminish.
Returns for Average, best and worst 529 plans for 2008.
To make matters even worse, a recent report by Morningstar found that the average 529 college savings account lost 22.4% in 2008.
If there is a silver lining in all of this, it may be that a recent change to the tax code allows parents to adjust their 529 asset allocations twice in 2009.
Normally, 529 account holders can only change their allocations once per calendar year. This would mean that anyone who was playing games with weighting or trying to time the market – say, keeping heavy stock allocations in an attempt to play catch-up – would get stuck holding the bag, can instead re-adjust their allocations to a more balanced approach before the year’s end.
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Posted: July 28th, 2009 | Author: Joe | Filed under: Investing | Tags: 529s, college savings, Investing, Tips | No Comments »
Here’s a tool for 529 plan comparisons, because you may not be aware of this, but you don’t always have to invest your college savings in your home state’s 529 plan. Some plans offer a tax deduction for any contributions to an instate plan, so you’ll want to check into that first. But assuming your state does not offer any such deduction, here’s a handy 529 college savings plan search, that allows you to view the details on the 529′s in every state from California to New York.
Here’s a sample of the 529 plan comparisons details provided (from New York, my state):
Summary:
The team of Upromise Investments and The Vanguard Group took over management of this 529 savings program from TIAA-CREF in late 2003. It now features age-based and static portfolio options utilizing Vanguard mutual funds, and accounts can be linked to the Upromise Rewards Service.
Program Details:
- Summary: The team of Upromise Investments and The Vanguard Group took over management of this 529 savings program from TIAA-CREF in late 2003. It now features age-based and static portfolio options utilizing Vanguard mutual funds, and accounts can be linked to the Upromise Rewards Service.
- Program type: Savings
- Program manager: Upromise Investments, Inc. and The Vanguard Group
- State residency requirements: None
- Maximum contributions: Accepts contributions until all account balances in New York’s 529 plans for the same beneficiary reach $235,000.
- Minimum contributions: $25, or $15 per pay period via payroll deduction
- Age-based investment options: The Age-Based Option offers a choice among three different risk levels (Aggressive, Moderate, or Conservative) each containing five portfolios of underlying mutual funds. Contributions are placed into the portfolio corresponding to the selected risk level and beneficiary?s age, and later reassigned to more conservative portfolios as the beneficiary approaches college age.
- Static investment options: Select among four multi-fund portfolios (Growth, Moderate Growth, Conservative Growth, and Income), nine individual index-fund portfolios, and the Vanguard Short-Term Reserves Account.
- Underlying investments: Vanguard mutual funds
- Enrollment or application fee: None
- Account maintenance fee: None
- Program management fees: 0.55% manager fee; fee includes underlying fund expenses.
- Expenses of the underlying investments: Not applicable, included in the program management fee.
- Total asset-based expense ratio: 0.55%
- Program match on contributions: None
- State tax deduction or credit for contributions: Contributions to any of New York’s 529 plans of up to $5,000 per year for an individual taxpayer, and $10,000 per year for married taxpayers filing jointly, are deductible in computing New York taxable income. Only contributions made by the account owner, or if filing jointly, by the account owner’s spouse, are deductible. Contribution deadline is December 31 postmark.
- Telephone: 1-877-697-2837
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