We told you in a blog article last month that saving for college using a 529 college savings plan could be one of your smartest moves for the New Year.
In fact, independent investment research firm Morningstar estimates that by the time children are ready for college, American households would collectively have $237 billion more in assets if they relied on 529 plans to save for those college bills.
See our January 2019 article: “A New Year’s Resolution You Should Make Right Now: Save Smarter For College”
There is just no way to beat the tax and investment advantages offered by a 529 savings plan.
(On the other hand, conservative investors who want a low-risk way to save might want to take a look at the Florida Prepaid Plan, which is a special type of 529 plan open only to Florida residents.)
But even though 529 plans are great ways to save, it does not follow that ALL 529 plans are great. They are not.
Finding the best 529 plan
One of the services we provide to clients is helping them select the best college savings strategy and 529 plan for their family. We also help them set up and fund the account, and monitor progress over time.
If you are doing this on your own, you can start by reviewing information available across the web, but in particular through Morningstar or SavingforCollege, which specializes in how to save for college. Both rank college 529 plans and help analyze and compare fees, investment options, and services.
Morningstar recently reviewed 62 plans and awarded its Gold designation to only 4, with other top finishers receiving Silver and Bronze designations.
We were proud to see several of our favorite 529 plans place at the top of the rankings. What makes these plans superior? They stand out due to their low fees, outstanding investment options, administrative excellence, and ease of use, all of which combine to make your college dollars go farther.
On the other hand, we were sad to see Florida’s College Savings 529 Plan receive a “negative” ranking from Morningstar (mind you, this is the 529 Savings plan and NOT the Florida Prepaid plan, which is in a separate category).
What was behind the downgrade? In this climate of fee compression, Morningstar came down hard on plans that “haven’t cut fees as aggressively as most peers.” Let’s hope the Florida plan goes back to the drawing board and comes back with a more competitive offering next year.