The Best and Worst 529 Plans for 2008
Consumer Reports recently published its May edition of Consumer Reports Money in which it ranked the 88 different 529 College Savings Plans.
If you aren’t familiar with College Savings Plans, I recently reviewed them in our “Best Ways to Save for College” series — check it out here. Or you can read a more in-depth analysis of 529 Plans in our section on College Savings.
While the past year was abysmal, at best, for mutual funds, there were still a few super stars — and a few super flops — among the 529 Plans, according to Consumer Reports. The magazine compared the plans based on three factors: investment flexibility, low expenses and fees, and 2008 performance. They also looked for plans that were appropriately tracked to decrease the level of investment aggressiveness in the three years before college.
The 5 Best 529 Plans in 2008
Each of these plans is direct-sold, which saves you significantly on fees and expenses.
1. Georgia’s Path2College 529 Plan
2. Iowa’s College Savings Iowa through Vanguard
3. Illinois’ Bright Start College Savings Program through Oppenheimer Funds
4. Mississippi’s Affordable College Savings Program through TIAA-CREF TFI
5. Colorado’s Direct Portfolio College Savings Plan, also through Vanguard
The 5 Worst 529 Plans in 2008
As for the worst funds, these five are all broker-sold, which tends to increase fees and expenses, thereby decreasing performance.
1. Wisconsin’s Tomorrow’s Scholar through Wells Fargo Funds
2. Arkansas’ John Hancock Freedom through T. Rowe Price
3. New Jersey’s Franklin Templeton through Franklin Templeton
4. New York’s Columbia New York Advisor through Columbia Management
5. Nevada’s Columbia 529 Plan through Columbia Management
To see how Morningstar ranked the 529 field for 2008, check out this Finder article on the Best & Worst 529 Plans of ’08.
And don’t forget… When you are comparing 529 Plans, remember to consider the potential tax savings of investing in your own state’s plan. If you can get an income tax deduction from your state for investing in its plan, consider that plan first. And if you are a resident of Arizona, Kansas, Maine or Pennsylvania, you can get a deduction regardless of which state plan you contribute to — even better! (Here is a complete list of deduction limits by state.)
** Hat tip to 5CentNickel for his earlier review of the Consumer Reports list.