All 529 Plans Are NOT Created Equal
All across the country, parents who have invested in 529 plans are seeing their balances shrink.
Why? Most 529 plans have high fees and are heavily invested in the stock market.
This quick article should explain what a 529 plan is, why many are not performing well, and finally offers advice on what you should look into.
What is a 529 plan? A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs.
What does tax-advantaged mean? Investments in the plan grow tax deferred.
There are two types of 529 plans: pre-paid tuition plans and college savings plans.
All fifty states and the District of Columbia sponsor at least one type of 529 plan.
In addition, a group of private colleges and universities sponsor a pre-paid tuition plan.
529 Performance...
From the beginning of 2008 to mid May, the markets have been on a wild ride.
In mid march the market was down over 10%.
Right now, the market has bounced back to a 2% loss.
The problem is that most 529 plans are not just investing in the indexes and most plans have extremely high internal fees.
Steps every parent should take.
1.
When little Johnny or Alice is born and you send out those cute birth announcements open a 529 account and start investing $100 a month in the plan.
2.
Every quarter review your 529 plan's performance relative to the S&P500 if your plan consistently underperforms the overall market then it probably is time to look at rolling your investment into another 529 plan.
3.
When reviewing a 529 plan look at the fees, are they charging a hidden load, are you charged an annual account fee? All of these fees eat into your returns while year to year it isn't a problem over time fees can have a dramatic affect on your overall return.
4.
If little Johnny or Alice is a new born then $100 a month trick works, if you start at age 5 think about rolling in $200 a month, but if you get a late start say age 10, start dropping $300 to$500 a month into a plan.
It is never too late to start and if you have already started it is never too late to right a sinking ship.
Review your 529 plan often.
Why? Most 529 plans have high fees and are heavily invested in the stock market.
This quick article should explain what a 529 plan is, why many are not performing well, and finally offers advice on what you should look into.
What is a 529 plan? A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs.
What does tax-advantaged mean? Investments in the plan grow tax deferred.
There are two types of 529 plans: pre-paid tuition plans and college savings plans.
All fifty states and the District of Columbia sponsor at least one type of 529 plan.
In addition, a group of private colleges and universities sponsor a pre-paid tuition plan.
529 Performance...
From the beginning of 2008 to mid May, the markets have been on a wild ride.
In mid march the market was down over 10%.
Right now, the market has bounced back to a 2% loss.
The problem is that most 529 plans are not just investing in the indexes and most plans have extremely high internal fees.
Steps every parent should take.
1.
When little Johnny or Alice is born and you send out those cute birth announcements open a 529 account and start investing $100 a month in the plan.
2.
Every quarter review your 529 plan's performance relative to the S&P500 if your plan consistently underperforms the overall market then it probably is time to look at rolling your investment into another 529 plan.
3.
When reviewing a 529 plan look at the fees, are they charging a hidden load, are you charged an annual account fee? All of these fees eat into your returns while year to year it isn't a problem over time fees can have a dramatic affect on your overall return.
4.
If little Johnny or Alice is a new born then $100 a month trick works, if you start at age 5 think about rolling in $200 a month, but if you get a late start say age 10, start dropping $300 to$500 a month into a plan.
It is never too late to start and if you have already started it is never too late to right a sinking ship.
Review your 529 plan often.
Source...