529 Plans, Which is best?

[heytootsy]

There are so many 529 college plans out there, and I am so confused as to which plan to pick. I hear the plan in my state, Illinois, has a decent one, but I think there are better. Anyone have any input on this>

[jd11365]

Good question! I was thinking of doing the Prepaid College fund...you lock in and pay today's tuition all up front or over 5 years in payments and your child can go to any state university when they are ready to go. If they choose not to go to college you get the initial investment back, not with interest though. But for those in the position to invest lots of money, apparantly the 529 is better because you can shelter money this way very effectively.

[deenass]

Our financial advisor at Morgan Stanley Dean Witter recommends the Van Kampen funds (Alabama).

[josephsmom]

I'm in the midst of researching this, too. I haven't made a decision yet, but I just received an interesting mailing from Fidelity Investments. If you open a 529 with them, you can also get a credit card in which you earn points for your purchases, which get converted to "cash back" into your 529 at the end of the year. The card has a 7.9% interest rate and no annual fee.

Helene
mommy to Joseph 12/29/01

[nohomama]

Check out www.savingforcollege.com . It has reviews and comparisons of the 529 plans offered by all 50 states. Joseph Hurley who runs and compiles all the information from the site also has a book, "The Best Way to Save for College: A Complete Guide to 529 Plans," and is widely regarded as an authority on 529 plans, educational IRAs, and strategies for saving for your child's education.

I'm not the one in our family who handles investing. I input all the information into Quicken and balance the accounts but I leave most investment decisions to Lola's father, Dan. He has used information from both the book and the site to devise a plan for saving for Lola's college education and highly recommends both.

[dogmom]

Kipling magazine had a rating of the college funds a few months ago. I checked out the www.savingforcollege.com and the motley fool site (www.fool.com)& some other sites to get information. One of the things you have to figure out is what tax breaks, if any, your state offers on these plans. If they don't have special breaks for your particularly state plan there is no advantage of choosing it over other plans.

One plan that comes up all the time is Pennsylvania. The District of Columbia has a new what that has socially conscious investing options. The problems with many of these 529 plans is once you figure in the administration fees, which they don't advertise in the big print, they don't have impressive rates of return.

You can put up to $2,000 a year in a Coverdale account, which is an education IRA AND still enroll in a 529 plan. With a Coverdale account you can choose any investment vehicle, just like a regular IRA. The tax laws for the 529 plans are only in place for 10 more years, or something like that. But since they are a big money maker for the brockerage firms I suspect there will be more than enough lobbying money available to get the legislation extended. We have started a Coverdale, but still haven't settled on a 529 plan because the one in Massachusetts sucks.

[C99]

Although we live in Illinois too, we went with American Funds, which is affliated with the state of Virginia.

[McQ]

We just setup a Coverdale and a 529 for our son. American Express recommended the Wisconsin 529 and I compared it to Virginia's (my state) and liked Wisconsin's better (sorry Caroline). Wisconsin's was more flexible in terms of who could be the beneficiary (Virginia's had term limits), the annual fee was waived if you had automatic investments or a certain dollar amount, and NO penalty for a non-qualified withdrawal (Virginia's was 10% of the earnings).

[kapow]

From a pure returns perspective, several financial planners with whom we spoke recommended the Virginia plan (American Family funds) and most said to avoid the Illinois plan (my state.)

[bjiang]

I agree the best place to look for information on 529 plans is

http://www.savingforcollege.com

The best plan is different for different people, depending on where you live, how much $$ you want to invest and what your investment style is. Most 529's have outrageous fees. I was specifically looking for a static stock index fund like S&P 500 with the lowest fees. Neveda Vanguard and Utah are the top choices in that regard. I would suggest you think about the features that are most important to you and use the savingforcollege.com website to help you narrow down the choices.

[llzink]

Hi, I also live in Illinois and looking into setting up the 529 plans. I was going to go thru one of the Illinois state plans until I read this thread. I see many Illinois people are picking plans from other states. I know Illinois residents get tax deductions if you pick the Illinois plan. Can anyone tell me why those other plans are better? Where are the savings in the other plans compared to Illinois. Any input would be appreciated.
Thanks

[mharling]

The website referenced above has an area where you can put different plans side by side for a comparison. Illinois has 2 plans and they are very different (one looks like a 'pre-paid' tuition plan and contributions are not tax deductible).

I am also from Illinois. My parents live in Iowa and have already started a plan in Iowa for my nieces and nephews. They will start an Iowa plan for ds as well.

Mary & Lane 4/6/03
http://www.shutterfly.com/osi.jsp?i=67b0de21b3237413c427 - New 6/18

[MinnieMouse]

We are in PA and went with PA's plan. They have two here...the "credit" plan where you buy credits at today's prices and cash them in when your child is in college OR the investment option which is through a fund manager...I can't remember which one.

We opted for the "credit" plan and are very happy with it. My FIL wanted more "control" over it though so he set up a separate one for dd and it's the investment option. He pulls dh aside every year at our Christmas get together and shows him how great it's doing....and "I" am the one that takes care of all this stuff...so frustrating LOL.

I think you got great advice so far...in fact I think I'm gonna go out and get that book :-).

As of this moment PA doesn't have any charges or fees for the credit plan....but that may change in the next few months...they are trying to decide if it's necessary.

HTH

Christine