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How 6 experts manage their kids’ 529 plans
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
Erin Peterson is a freelance writer based in Minnesota
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