View our latest poll:
Do you think states should be giving state tax deductions for 529-plan contributions?
529 Plan Details:
Enter your state:
World's Simplest College Calculator:
How old is your child?
Find a 529 Pro:
Enter your zip code:
Enroll In a 529 Plan:
Finding the lowest-cost 529 savings plans
Savingforcollege.com’s 529 Fee Study, updated as of November 1, 2009, suggests that you can find the lowest-cost 529 investment options in Ohio (CollegeAdvantage), Kansas (Learning Quest), Illinois (Bright Start), North Carolina (National College Savings) and VIrginia (VEST). Each of these plans has at least one stock- or bond-based option with 10-year costs totaling under $400 on a $10,000 initial investment. Costs include all account maintenance and investment management fees, including the expense ratios of the underlying investments in the plans’ investment portfolios.
The study examines all direct-sold 529 plans, with data compiled from the fee tables that are part of the official program disclosures. (Adviser-sold plans generally have much more complex fee structures and are not included.) The study also excludes the “no-fee” bank CD options and insurance-backed guaranteed options found in several of the plans. Of the 40 states offering a 529 plan with no state residency requirements, sixty percent (24) have at least one investment option available to nonresidents with 10-year costs below $700. A small number of states accept only residents into their direct-sold 529 plans. For example, Louisiana maintains the lowest-cost of any 529 savings plan, but the plan is available only to Louisiana residents.
Fees and expenses can have a significant impact on a college-savings fund. If the annual return of the underlying investments in Plan A is 7 percent, and the plan manager charges a fee of 20 basis points (0.20%), an investment of $5,000 today will grow to be worth $16,340 in 18 years. If Plan B uses the same underlying investments, but charges a management fee of 40 basis points, that same $5,000 investment will grow to $15,798, or $542 (3.4%) less than Plan A. The difference can be even larger if Plan A uses less-expensive underlying investments (e.g. index funds) than Plan B.
However, fees should not be the only factor in selecting a 529 plan. The more important figure is the NET performance of your 529 account after all costs. State tax and other benefits are also important factors.
Joe Hurley is the founder of Savingforcollege.com LLC, and a certified public accountant.
Savingforcollege.com editorial corrections policy
College Calculator
The simplest way to estimate college costs.
Login to My Account