The Wall Street Journal reports that Morningstar finds most state-sponsored 529 college-savings plans offer lower fees and better investment options than they did in the past. However, not all are created equal, and some do very poorly and should be avoided.
The savings plans provide tax-deferred savings, as long as the funds are spent on education expenses such as tuition, fees, room and board. The investments are managed by professional fund managers selected by the state. You can get a general idea of how much you can save if you add to them regularly by using this 529 calculator on Yahoo! Finance.
The Morningstar ratings are the latest way to help decide which funds are the best investments -- this year. There’s a good chance it won’t be your own state’s fund, even if it’s your first inclination to put your money there. New York, for instance, always seems to fare poorly on these lists. I live in New Jersey, but when we opened our first 529 account, we went with California’s TIAA-CREF fund. The good news is, new rules make it easier to move funds from one 529 to another once a year. For more info on 529s, check out these 529 Plan FAQs on Kiplinger.
Check out the Wall Street Journal’s excellent rundown on the good and bad of the best-run and worst-run funds this year. For a quick look, here are the top 5:
• Colorado Scholars Choice College Savings Program
• Illinois Bright Start College Savings Program
• Maryland College Investment Plan
• Virginia CollegeAmerica
• Virginia Education Savings Trust
And the worst 5:
• Mississippi Affordable college Savings Plan; Affordable College Savigns Advisor Program
• Nebraska AIM College Savings Plan
• New York 529 College Savings Plan
• Ohio Putnam CollegeAdvantage Plan
Side note: If you've already got a child in college who is moving into an off-campus apartment this year, check out this affordable ($40) Ikea laptop-station wall unit on At Home. Who can spend a lot of money on furnishings when so much money is going out the door for education expenses?