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Money-Guy 10-04-2010
Today’s show is a follow-up to a show we did back in February 2009 titled “529 College Savings and ‘The 2009 Stimulus‘”. Now that we have had a decent run up in the financial markets, we have the ability to look back in time and see how well those “best” and “worst” plans have done.
In the March 2009 issue of Consumer Report’s Money Advisor, the Consumer Reports team went and rated the 5 best and 5 worst 529 savings plans based on the costs of investments, diversity of allocations, and ease of implementation. Obviously when this article came out, things were pretty bad. Therefore, we thought it would be interesting to look and see how they have held up since those 2009 lows. According to Consumer Reports, the 5 best and 5 worst plans were:
We then went to Morningstar.com and looked up each individual plan. Over the last year, of the 5 best plans, the highest performing plan amongst the 5 “Best” plans for the most conservative allocation(oldest beneficiaries) was the Iowa plan and for the most aggressive(youngest beneficiaries) allocation was the Georgia plan. In the “Worst” category, the best performing conservative allocation belonged to Wisconsin and the most aggressive allocation was Nevada.
What we found especially intestesting was that Morningstar provided how each portfolio did during its worst 3 months. Where I think this information becomes very pertinent is for those individuals who have 529 assets for children who are currently in college. Amongst the plans with the most conservative allocations (18+ beneficiaries) the worst three months belonged to the GA plan with a loss of 11.17%. As you can imagine, for parents trying to currently pay college costs, this is a fairly substantial hit. The allocation that held up best belonged to the NJ plan with a loss of just over 4%.
As you listen to the show, I get more in depth with how each plan did as well as explain what you should look for when selecting a 529 plan. I also touch on some considerations you may want to make before you decide to give up on your state’s current plan (i.e. does the tax savings compensate for the higher fees?). Savingforcollege.com, Morningstar.com, and Collegesavings.org are three great resources to use when trying to determine what plan is best for you and your family.
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