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The Best 529 Plans – 2009 Edition

Written by Nickel - 4 Comments

As a followup to my recent article on 529 plans, I thought I’d highlight the most recent batch of 529 plan ratings from Consumer Reports. For those that aren’t familiar with them, 529 plans are tax-advantaged savings plans that are designed to encourage people save for future college costs.

The following list of the best 529 plans is based on investment flexibility, fees and expenses, and 2008 performance. While it’s tough to learn much from performance during such a dismal year, some plans have clearly been holding inappropriate allocations. For example, one of Utah’s age-based portfolios, which is targeted at students over the age of sixteen (i.e., with just 1-2 years before they need the money), was so heavily weighted toward stocks that it lost over 26% last year.

With that as a backdrop, here are the ratings…

The five best 529 plans

Path2College 529 Plan (Georgia; TIAA-CREF)
College Savings Iowa (Iowa; Vanguard/Upromise)
Bright Start College Savings Program (Illinois; Oppenheimer)
Mississippi Affordable College Savings Program (Mississippi; TIAA-CREF)
Direct Portfolio College Savings Plan (Colorado; Vanguard/Upromise)

Note that, as long as you’re using a “college savings plan” as opposed to a “pre-paid tuition plan,” you’re not locked into a particular school (or even state). See my earlier article for details.

Don’t forget the tax breaks

Another factor to consider is that many 529 plans offer state residents an income tax deduction on at least a portion of their contributions. While that won’t be enough to tip the scales in favor of a fee-laden plan, it might be enough to make a decent plan look great.

Published on April 27th, 2009 - 4 Comments
Filed under: Education, Saving & Investing

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

4 Responses to “The Best 529 Plans – 2009 Edition”

1
Jeff Rose Says:
May 4th, 2009 at 3:48 pm
I have to assume that Consumer Reports had a mix up on the state of Illinois plan. Our state has two 529 plans: Bright Start and Bright Directions. Bright Start is the program that current State Treasurer is pursuing legal action against them (Oppenheimer) for investing outside the stated guidelines of their Core Bond fund.

http://www.progressillinois.co.....ight-start

Bright Directions on the other hand is a pretty decent program. Not the best, but compared to Bright Start, far superior.

I think Bright Start should have been included as one of the 5 worst instead.
2
Nickel Says:
May 4th, 2009 at 3:54 pm
Jeff: Bright Start also has Vanguard funds, don’t they? They added them back in July 2007, though I guess it’s possible that they’ve since dropped them.
3
Nickel Says:
May 4th, 2009 at 3:55 pm
Yep, just checked, and they still offer Vanguard. I listed Oppenheimer above because that’s what CR listed, but I can only assume that the plan ranks as highly as it does because of Vanguard.
4
Jim Says:
May 4th, 2009 at 5:12 pm
Before you guys going thinking Illinois’ plan is all that, you might want to check this out:

http://newsblogs.chicagotribun.....ogram.html

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