Saving for college in this account won’t get you very far

Personal Finance

If you’re shopping for a 529 plan, do your homework first. Here’s where to start.

Search nationwide. More than 30 states offer tax incentives to residents who contribute to their college savings plans. There is no requirement that you choose your home state’s plan, however. You may find a better deal elsewhere.

Know the fees. Expenses, including account fees and fund costs, erode your returns over time. Look up fee data as you shop for college savings plans. allows you to compare plans based on expenses and state tax benefits.

Do it yourself or seek help. College savings plans can either be direct-sold — you purchase the plan on your own and choose your investments — or advisor-sold.

The difference in cost is sharp: The average fee for advisor-sold plans that invest in active funds can be as high as 1 percent, according to Leo Acheson, associate director of multiasset and alternative strategies at Morningstar.

Direct-sold plans with actively managed funds average about 80 basis points, while those with passive funds average around 25 basis points, he said.

Save early and often. A child who’s a year old has a longer time horizon and more time to reap investment returns, compared with a teenager who’s about to go to college. Contribute early and regularly.

More from Personal Finance
Hey, voters: 18 midterm election tax measures to watch for at the polls
Ranks of 401(k) and IRA millionaires swell
Why you shouldn’t panic about the midterms and the market

Source link

Products You May Like

Articles You May Like

Large fund firms’ support for combating climate change is all talk
10 cities could lose $34 billion in housing to coastal floods by 2050
Better economic data needed before Wall Street returns to all-time highs
Passive investing now controls nearly half the US stock market
General Electric, Facebook, Apple, Tailored Brands & more

Leave a Reply

Your email address will not be published. Required fields are marked *