COLLEGE SAVINGS 101

Savingforcollege.com

How 6 experts manage their kids 529 plans
http://www.savingforcollege.com/articles/20091009-how-6-experts-manage-their-kids-529-plans

Posted: 2009-10-09

by Erin Peterson

Most parents want to provide a quality education for their children and many of them choose a 529 plan as the financial vehicle to achieve that goal. But how to select the right plan and how to manage that account through the years can be quite a challenge.

For greater insight, we went directly to six financial experts who have opened and maintained 529 plans for their own children, to see what they looked for in a plan and for their best advice, based on personal experience.

Name and title: Artie Green, a financial planner and adviser for PWJohnson Wealth Management in Sunnyvale, Calif.
Children: Son, Brad, 19, who started college this year. 529 Plan: Ohio CollegeAdvantage 529 Savings Plan
Contributions: In 2007 Green shifted assets from an UTMA, a trust established under the Uniform Transfers to Minors Act, to a 529 plan; though he did not contribute any additional funds, he let the investments grow over the course of two years.
Rationale: Because California does not offer a state income tax break for 529 contributions, Green felt no particular need to stick with his state's plan. Instead, after consulting with Morningstar's ratings and searching for plans that offered low costs and plenty of investment options, he chose Ohio's plan.
Speaking from experience: Don't discount costs. "One of the things we always try to do is minimize costs for our clients," says Green. "I think it's important to look at Morningstar's reviews because they tend to focus on costs. And if you're looking to manage the plan yourself, you'll also want to find a plan with lots of flexibility."

Name and title: Rick Kahler, president of Kahler Financial Group in Rapid City, S.D.
Children: London, 12, and Davin, 8
529 Plan: CollegeAccess 529 (Direct-sold), South Dakota
Contributions: Kahler started funding the plans a month before each child was born. He continues to contribute on a monthly basis; he contributes $300 for his older child and $200 for his younger child.
Rationale: In South Dakota 529 plan participants are required to set up a fund through a broker if they want to do anything other than an age-based plan; because Kahler wasn't interested in paying the extra fees to a broker, he chose the age-based plan. He also did a needs analysis to determine how much funding he should provide for each child based on the average cost of education.
Speaking from experience: Watch what your adviser does, not just what he says. "I don't do anything different with my kids' 529 plans than I would with a client's. If you're not following your own advice, what does that say to the people who are?"

Name and title: Ed Christiansen, a financial adviser with Merrill Lynch in Walnut Creek, Calif.
Children: Trevor, 15; Kendall, 11; and Cameron, 8
529 Plan: NextGen College Investing Plan - Client Select Series, Maine
Contributions: After setting all three plans up about eight years ago, Christiansen continues to contribute to each monthly.
Rationale: Christiansen acknowledges he's biased toward his employer's plan, but he adds that he's appreciative of the plan's accessibility, the ease of automatic transfers, and the ability to get real-time information on investment performance.
Speaking from experience: Remember to monitor your investments -- even if you've chosen an age-based plan. "A lot of folks put a hundred or two hundred dollars into a plan, and they forget about it, just like a 401(k) -- we're all guilty of it at times," he says. "But you need to know what your goals are and to make sure you're hitting them."

Name and title: Joe Orsolini, CFP, and president of College Aid Planners in Glen Ellyn, Ill.
Children: Steve, 5, and Matt, 3
529 Plan: Bright Directions College Savings Program, Illinois
Contributions: Orsolini has contributed $100 monthly to each fund since his kids were born; he kicks in a bit extra for his sons' birthdays and Christmas to give each an even $2,000 each year.
Rationale: With Illinois' generous tax deduction, Orsolini decided to stay in-state with his 529 plan. The multi-manager plan provides more flexibility to choose from among the best managers in the business, from global investments to bonds.
Speaking from experience: Recognize that bigger isn't always better -- sometimes just getting started with a 529 plan is better than delaying or not getting started at all. "My philosophy is that children start out small -- and so can their college funds," he says. "The easiest thing to do is start small and use dollar-cost averaging through an automatic investment plan. As your annual salary gets bigger, you can start to put in more money."

Name and title: Rick Carr, president of Richard Carr and Associates, Worcester, Mass.
Children: Ben, 10, and Molly, 8
529 Plan: CollegeAmerica, Virginia
Contributions: Carr has contributed monthly to the plans since Molly was born and Ben was 2 years old. He also contributes for various milestones, whether it's a first lost tooth or first hockey goal. Cash gifts from relatives also often go into the plan.
Rationale: Carr did his homework. He first looked at the track records of the managers who were responsible for handling the assets in the 529 plans he was considering. And then he chose the one he felt had the best potential to generate returns he would be comfortable with over time. Carr, who says he's not a fan of age-based plans, which have a preset mix of stocks and bonds, looked for a manager he believed could cherry pick investments poised to do well.
Speaking from experience: If you've got a good plan, don't ditch it just because the overall market hits a rough patch. "If you've got a well diversified portfolio that's appropriate from a risk standpoint, stick with it," he says. "It was enormously painful last year, but this year, most people will find that it'll work to their benefit."

Name and title: Salvatore Cocco, a financial consultant with AXA Advisors in Nutley, N.J.
Children: Michael, 27; Daniel, 24; and Ashley, 20
529 Plan: CollegeBoundfund (Direct-sold, Alternative R), Rhode Island
Contributions: Cocco began monthly contributions to plans for his younger son and daughter shortly after the inception of 529 programs in 1996. He stopped funding a 529 for his daughter shortly before she went to college.
Rationale: Cocco admits that the details are a bit fuzzy on criteria he used for the program he chose more than a decade ago, but he says cost, performance, and investment choices were among his top considerations. He was also familiar with AllianceBernstein and trusted their experience and expertise.
Speaking from experience: Be prepared for unexpected costs. "In high school, my daughter wanted to go a school that had tuition costs of about $10,000 a year -- and I had saved for that. But as a sophomore, she said, 'You know, Dad, I think I'm ready to go (to another school).' So now she's going to a private university, and tuition costs went from $10,000 to $38,000. So you want to determine costs for the school you think your children might go to, as well as the one that might be a little bit more expensive and one that's a little bit cheaper."

Posted October 9, 2009

Most parents want to provide a quality education for their children and many of them choose a 529 plan as the financial vehicle to achieve that goal. But how to select the right plan and how to manage that account through the years can be quite a challenge.

For greater insight, we went directly to six financial experts who have opened and maintained 529 plans for their own children, to see what they looked for in a plan and for their best advice, based on personal experience.

Name and title: Artie Green, a financial planner and adviser for PWJohnson Wealth Management in Sunnyvale, Calif.
Children: Son, Brad, 19, who started college this year. 529 Plan: Ohio CollegeAdvantage 529 Savings Plan
Contributions: In 2007 Green shifted assets from an UTMA, a trust established under the Uniform Transfers to Minors Act, to a 529 plan; though he did not contribute any additional funds, he let the investments grow over the course of two years.
Rationale: Because California does not offer a state income tax break for 529 contributions, Green felt no particular need to stick with his state's plan. Instead, after consulting with Morningstar's ratings and searching for plans that offered low costs and plenty of investment options, he chose Ohio's plan.
Speaking from experience: Don't discount costs. "One of the things we always try to do is minimize costs for our clients," says Green. "I think it's important to look at Morningstar's reviews because they tend to focus on costs. And if you're looking to manage the plan yourself, you'll also want to find a plan with lots of flexibility."

Name and title: Rick Kahler, president of Kahler Financial Group in Rapid City, S.D.
Children: London, 12, and Davin, 8
529 Plan: CollegeAccess 529 (Direct-sold), South Dakota
Contributions: Kahler started funding the plans a month before each child was born. He continues to contribute on a monthly basis; he contributes $300 for his older child and $200 for his younger child.
Rationale: In South Dakota 529 plan participants are required to set up a fund through a broker if they want to do anything other than an age-based plan; because Kahler wasn't interested in paying the extra fees to a broker, he chose the age-based plan. He also did a needs analysis to determine how much funding he should provide for each child based on the average cost of education.
Speaking from experience: Watch what your adviser does, not just what he says. "I don't do anything different with my kids' 529 plans than I would with a client's. If you're not following your own advice, what does that say to the people who are?"

Name and title: Ed Christiansen, a financial adviser with Merrill Lynch in Walnut Creek, Calif.
Children: Trevor, 15; Kendall, 11; and Cameron, 8
529 Plan: NextGen College Investing Plan - Client Select Series, Maine
Contributions: After setting all three plans up about eight years ago, Christiansen continues to contribute to each monthly.
Rationale: Christiansen acknowledges he's biased toward his employer's plan, but he adds that he's appreciative of the plan's accessibility, the ease of automatic transfers, and the ability to get real-time information on investment performance.
Speaking from experience: Remember to monitor your investments -- even if you've chosen an age-based plan. "A lot of folks put a hundred or two hundred dollars into a plan, and they forget about it, just like a 401(k) -- we're all guilty of it at times," he says. "But you need to know what your goals are and to make sure you're hitting them."

Name and title: Joe Orsolini, CFP, and president of College Aid Planners in Glen Ellyn, Ill.
Children: Steve, 5, and Matt, 3
529 Plan: Bright Directions College Savings Program, Illinois
Contributions: Orsolini has contributed $100 monthly to each fund since his kids were born; he kicks in a bit extra for his sons' birthdays and Christmas to give each an even $2,000 each year.
Rationale: With Illinois' generous tax deduction, Orsolini decided to stay in-state with his 529 plan. The multi-manager plan provides more flexibility to choose from among the best managers in the business, from global investments to bonds.
Speaking from experience: Recognize that bigger isn't always better -- sometimes just getting started with a 529 plan is better than delaying or not getting started at all. "My philosophy is that children start out small -- and so can their college funds," he says. "The easiest thing to do is start small and use dollar-cost averaging through an automatic investment plan. As your annual salary gets bigger, you can start to put in more money."

Name and title: Rick Carr, president of Richard Carr and Associates, Worcester, Mass.
Children: Ben, 10, and Molly, 8
529 Plan: CollegeAmerica, Virginia
Contributions: Carr has contributed monthly to the plans since Molly was born and Ben was 2 years old. He also contributes for various milestones, whether it's a first lost tooth or first hockey goal. Cash gifts from relatives also often go into the plan.
Rationale: Carr did his homework. He first looked at the track records of the managers who were responsible for handling the assets in the 529 plans he was considering. And then he chose the one he felt had the best potential to generate returns he would be comfortable with over time. Carr, who says he's not a fan of age-based plans, which have a preset mix of stocks and bonds, looked for a manager he believed could cherry pick investments poised to do well.
Speaking from experience: If you've got a good plan, don't ditch it just because the overall market hits a rough patch. "If you've got a well diversified portfolio that's appropriate from a risk standpoint, stick with it," he says. "It was enormously painful last year, but this year, most people will find that it'll work to their benefit."

Name and title: Salvatore Cocco, a financial consultant with AXA Advisors in Nutley, N.J.
Children: Michael, 27; Daniel, 24; and Ashley, 20
529 Plan: CollegeBoundfund (Direct-sold, Alternative R), Rhode Island
Contributions: Cocco began monthly contributions to plans for his younger son and daughter shortly after the inception of 529 programs in 1996. He stopped funding a 529 for his daughter shortly before she went to college.
Rationale: Cocco admits that the details are a bit fuzzy on criteria he used for the program he chose more than a decade ago, but he says cost, performance, and investment choices were among his top considerations. He was also familiar with AllianceBernstein and trusted their experience and expertise.
Speaking from experience: Be prepared for unexpected costs. "In high school, my daughter wanted to go a school that had tuition costs of about $10,000 a year -- and I had saved for that. But as a sophomore, she said, 'You know, Dad, I think I'm ready to go (to another school).' So now she's going to a private university, and tuition costs went from $10,000 to $38,000. So you want to determine costs for the school you think your children might go to, as well as the one that might be a little bit more expensive and one that's a little bit cheaper."

Posted October 9, 2009

 

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