529s Are the Undisputed Kings of College Savings

Money magazine recently gave 529 college savings programs an overwhelming endorsement saying that "the best [college] savings plan gets even better." Their thoughts:

You'd now be a fool to save for college any other way but in a 529 plan. The real question then is not whether to save for college in a 529 account but which one to pick. There are some 85 plans available nationwide, with almost every state offering at least one program and some, like West Virginia, offering as many as five.

So it's hard to beat that recommendation, huh?

The piece goes on to do two things that I'd like to share with you. First, they list five "rules" for making the most of your 529. The tips:

Rule 1: Look first at your own state plan
Rule 2: Keep your expenses low
Rule 3: Pick funds that match your style
Rule 4: Perform an annual checkup
Rule 5: Plan you exit strategy

Based on the process I used when I researched my 529s, I would have to say I agree with these steps. It's also interesting to me that they bring up the matter of keeping costs low. Yes, it's always better to maintain low costs when doing investing of any type -- it helps you keep more of the money you earn.

The second part I want to share is that they list the best 529 plans. They break them up into two groups -- 22 plans that are "the best" if you live in the state that sponsors the plan and five plans that are good no matter where you live. I was pleased to see that my Michigan plan makes the top-tier of plans that "are good for their own state's citizens, but also for anyone whose in-state plan doesn't merit a star." Finally! A reason to live in Michigan!!! ;-)

For more on college savings and 529s, see these links:

• Why 529s Make Sense

• FAQs on 529 College Savings Plans and Why 529s are a Good Deal

• What to Do with 529 Money If Your Child Gets a Scholarship

Comments

[Scott Kustes]

So do you have to have offspring to start a 529 plan or could one start a plan with yourself as the beneficiary and then change it to the child once one is hatched? If so, that could buy a couple extra years of saving for college for those of us without kids and possibly earn some of those state tax deductions bring a bit of tax relief. Any clue?

[Nabloid]

I really think these plans are a good idea. I wish my parents would have thought of that... id be debt free (no student loans!).

[Brian]

Unfortunately their information is not updated for the new Illinois 529 plan. Our new state Treasurer has replaced Legg Mason with Oppenheimer/Vanguard. The expenses have been lowered significantly and they are now offering index funds for ultra low expenses.

[Phil]

What happens to the 529 money if your child chooses not to go to college?

[FMF]

Phil --

See this post:

http://www.freemoneyfinance.com/2007/06/what_to_do_with.html

[MetaMommy]

Ben Bernanke, Fed Reserve Chairman, disclosed his personal financial information, and I found it so curious that his only listed one liability:

"The only liability listed on the form was a 10-year student loan, taken out last year at an interest rate of 7.9 percent. Bernanke has two children - one son and one daughter."

I wonder if he had a 529 plan?