I've been sorting out our college savings options this year and I'm very intrigued by 529 plans (there are lots of benefits to 529s). However, the world of 529s seems murky to me -- especially in the area of fees (though it seems as if their fees are becoming clearer -- and going down) . Still, they seem difficult (if not impossible) to accurately define in many cases. So this article from Bankrate is perfect for me. It tells how to evaluate 529 college savings plans. They start with this determining issue:
The first decision you must make in selecting a 529 plan is whether to do the research on your own or seek the recommendation of a financial professional.
I think I can make that choice in about 1.2 seconds. I'll be picking my 529 myself. Why do I need a salesperson to steer me into a large-fee 529 plan?
The piece then makes this comment:
You can reduce the expense involved in choosing and investing in a 529 plan, but not necessarily guarantee better results, if you search for a direct-sold (i.e., nonbroker) 529 plan on your own.
FYI -- buying a broker-sold fund doesn't guarantee better results either. In fact, it makes it harder to get better results because there are higher investment fees -- something that can significantly limit the performance of your investment.
But the meat of the article is actually pretty good -- despite their tendency toward broker-sold 529s. Their main tips to finding a great 529 plan:
- Review the eligibility requirements.
- Make sure you can meet the minimum contribution requirements.
- Evaluate the available investment options and be sure the program offers at least one option that meets your own investment objectives.
- Compare program management fees and account maintenance fees.
- Check for other limitations.
They end with this great piece of advice:
Most importantly, don't let the process of comparing 529 plans prevent you from getting started with your college savings. If you decide later on that a different 529 plan is best for you, you'll be able to change 529 plans as often as once every 12 months and even more frequently if you are willing to switch your children around as beneficiaries.
I am about ready to pull the trigger on our 529s -- we WILL have something by the end of the year. First, I need to update my wife on our finances. Then, once we agree on our college saving plan, we'll be ready to jump in.
For those of you wondering if college is worth the expense and effort or not, it is. Don't believe me? Check out these posts:
And for those of you looking at ways to save for, save on, or pay for college, see these posts:
Finally, to make the most of your college experience, see the Free Money Finance Guide to College Success.
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