The Worst 529 Plans – 2009 Edition
Tip It!As a complement to this morning’s post on the best 529 plans, here’s a list of the worst 529 plans, once again courtesy of Consumer Reports. Without exception, these funds have to be purchased through a broker or financial advisor, which translates into significantly higher fees and correspondingly worse performance.
The five worst 529 plans
- Tomorrow’s Scholar (Wisconsin; Wells Fargo)
- John Hancock Freedom 529 (Alaska; T. Rowe Price)
- Franklin Templeton 529 College Saving (New Jersey; Franklin Templeton)
- Columbia New York Advisor 529 Plan (New York; UPromise/Columbia Management)
- Columbia 529 Plan (Nevada; Columbia Management)
Is your state on the list?
The good news for those that live in one of the states listed above is that most states offer multiple plans. Hopefully you’ll be able to find something more acceptable. If not, you may want to look outside your state. Yes, you’ll be giving up any possible state income tax breaks by doing this, but that’s probably a better option than putting your money into a bad plan.
Published on April 27th, 2009 - 5 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!
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April 27th, 2009 at 3:42 pm
Anyone reading this thinking they’d like to invest in Wisconsin’s plan should know the direct-sold EdVest plan (edvest.com) probably doesn’t rate as poorly as the Tomorrow’s Scholar program. It’s fee free to WI residents, and offers a state tax break. There are some decent funds to pick from, though not as many as other programs.
April 27th, 2009 at 6:39 pm
I’m not surprised that NJ made the worst list. Even though there are no tax benefits, NJ residents may not want to entirely write it off. If you sock away only $300 per year for 12 years, NJ residents can get a $1,500 scholarship useable at any school in the state (public or private). The rest of your annual college savings can go into another, better state’s plan. Sure, you’ll pay more on that $300 due to the higher plan fees, but not even close to $1,500 more. Just don’t do more than the minimum to qualify.
April 27th, 2009 at 9:31 pm
As a follow up to Justin’s comment about Wisconsin’s 529 program…as best I can tell Edvest = Tomorrow’s Scholar = Wells Fargo. I have a WI 529 through Edvest and had never heard of Tomorrow’s scholar until this article. But when I went to tomorrow’s scholar and tried my “Edvest” (really Wells Fargo) login, sure enough it worked. I’m not sure exactly what the relationship between Edvest and Wells Fargo is. They do offer a couple of Vanguard funds with lower expenses as well as Money Market and CD options, but otherwise CR is correct that the expense ratios are .79 and up.
May 1st, 2009 at 12:11 pm
Just FYI a great option if you are in one of these states and decide to go out of state are the West Virginia and Illinois 529 plans which uses Dimensional Fund Advisors. They offer outstanding fund options.
June 12th, 2009 at 10:58 am
If we are investing in a “bad” 529 what should we do? We are investing through First Command (don’t get me started, we know how HORRIBLE they are) and have one plan through USAA. I don’t know what state First Command goes through but USAA goes through Nevada. We live in Virginia, but we are military so we probably won’t be here forever. What should we do??