| How to research a 529 plan |
| |
|
Researching
529 plans
If you're ready to dismiss the idea of investing in 529 plans because
they're a hassle, do reconsider. Bankrate's 529
college savings plan estimator shows you how much more you can
earn in a 529 plan than if you put your savings in a taxable account.
As an example, if you're in the 25-percent income tax
bracket and you put away $1,000 a year for 18 years, assuming
a 7 percent return on your money in either account, you will have
nearly $14,000 more inside the 529 plan than in a taxable account.
Bankrate offers a great place to begin your research
on 529
plans. You can also do some in-depth research for free on Morningstar
(registration required). The site gives a load of data about 529
plans, including performance, fees and state tax info. A listing
of the state plans on one page lets you see at a glance the name
of the investment firm (or program manager) that runs the plan in
each state. Here you can do your process of elimination quickly.
For low-cost options, I would seriously consider plans run by Vanguard
(especially if you favor index funds). Other plans to look at would
be those run by Fidelity and T. Rowe Price.
Finally, be sure to jot down all the expenses involved
in the plans you're considering and do a cost analysis with the
finalists using the NASD's 529
expense analyzer.
Then all you have left to do is determine which discretionary
dollars to direct to your child's 529 college plan -- but that's
not something I can help you with. A $100 monthly investment starting
from the time your child's a toddler will go a long way toward setting
up his or her future.
Longtime financial journalist Barbara Mlotek Whelehan
earned a certificate of specialization in financial planning.
If
you have a comment or suggestion about this column, write to Boomer
Bucks. | 
