Top 529 College Savings Plans

Recently, I had written a post providing an overview on 529 plans. They come in two flavors – “529 prepaid tuition plans” and “529 college savings plans”.

In this post, I am going to focus on the “529 College Savings Plans”.

The 529 College Savings Plan comes with a lot of flexibility – you can invest in any state’s plan, a lot more investment choices, and you can use the funds towards IRS approved college education in any state or private college.

 

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Morningstar does an excellent job of ranking college savings plan every year. They evaluate the plans based on a number of factors including but not limited to performance, price, and potential tax breaks that might be available.

 

Top 529 College Savings Plans

Per Morningstar’s publication as of Oct 2015, below are the top four 529 college savings plans that received their “Gold Rating”. They are not listed in any particular order:

 

Maryland College Investment Plan

Maryland’s college savings plan has received Morningstar “gold” rating for the past six years in a row.

  • Minimum Monthly Contribution: $25 per month to participate in this plan.
  • Fees: $10 Annual Account maintenance fee
  • Investment Choices: They have target date funds, stock funds, bond funds, and U.S. Treasury money market portfolio.
  • Expense Ratio: Total annual asset based fee ranges from 0.11% to 0.81%. Excluding the money market account, the fee ranges from 0.50% to 0.81%
  • Performance: Here is the link to Maryland College Savings Plan fund performance.

 

T. Rowe Price College Savings Plan

T. Rowe Price manages Maryland and Alaska’s college savings plans. T. Rowe Price College Savings plan is available nationally to residents of all states. It has received a Morningstar “gold” rating for the past six years in a row.

  • Minimum Monthly Contribution: $50 per month to participate in this plan.
  • Fees: $10 Annual Account maintenance fee. Waived if you do automatic monthly deposits or meet any one of the other criteria.
  • Investment Choices: They have target date funds, static stocks and bond funds, and money market portfolio.
  • Expense Ratio: Total annual asset based fee ranges from 0.17% to 0.81%.
  • Performance: Here is the link to T. Rowe Price College Savings Plan fund performance.

 

Vanguard 529 College Savings Plan

The issuing state is Nevada and the program is managed by Ascensus.

  • Minimum Monthly Contribution: Requires minimum initial contribution of $3000. For Nevada residents, the initial minimum contribution is $1000. From then on, $50 per month to participate in this plan. If you are starting an automatic investment plan through your employer, you can start with $50 per month without an initial minimum contribution.
  • Fees: $20 Annual Account maintenance fee may be charged if the account balance is less than $3000. .
  • Investment Choices: Wide variety of age-based funds, static stocks and bond funds, and money market portfolio.
  • Expense Ratio: Total annual asset based fee ranges from 0.19% to 0.49%.
  • Performance: Here is the link to Vanguard 529 College Savings Plan fund performance.

 

Utah Educational Savings Plan

The issuing state is Utah and the program is managed by Ascensus.

  • Minimum Monthly Contribution: None.
  • Fees: Maximum of $12 Annual Account maintenance fee if you choose statements to be delivered by mail. If you choose e-delivery, the fee is waived.
  • Investment Choices: Good variety of age-based funds, static stocks and bond funds, and money market portfolio.
  • Expense Ratio: Total annual asset based fee ranges from 0.16% to 0.214%.
  • Performance: Here is the link to Utah Educational Savings Plan performance.

 

Choosing 529 College Savings Plan

How do you go about choosing the college savings plan that is right for you? This is a great question. Here is how I would go about it.

#1 Check if you have any tax benefits for investing in your in state plan. If your state doesn’t provide an tax benefit, then you could pick one of the plans above.

#2 Check the performance of your in state plan and see how it measures up against the ones listed here.

#3 Check the expense ratio of the funds available in your state and see how it compares to the ones listed above.

After considering all of the above, choose the one that is right for you.

Savings for College is a great site for comparing college saving plans and they have tax advantages that might be available for investing in a college savings plan in your home state.

 

Stretch A Dime Opinion:

A lot of parents don’t start saving for college until their kids enter into high school. The key here is to start early – that is the best way to leverage the power of compounding.

Do your research and choose a plan that suits your needs.

I have been saving for my kids college education through another investment that is not 529 based. This year I am planning to start a 529.

Based on the research I have done thus far, I am strongly leaning towards the Utah Educational Savings plan given it’s extremely low cost, low fees, and good track record fund performance. My second choice would be the Vanguard 529 College Savings Plan.

If you liked this post, please share it on social media. Are you saving for your child’s college education? Which college savings plan did you choose to go with? 

 

 

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4 thoughts on “Top 529 College Savings Plans”

  1. As with anything starting early is better in the long run. I would suspect that there won’t be enough time to save significantly if these plans are not started until high school.

    Enjoy the journey!

    1. Hi Mandy,

      Starting sooner is always better. You are right, if you start late, you can’t leverage the power of compounding much. However, it is better to start late than never :).

      –Michael

  2. Early is better for so many reasons. Not only does it give more time to compound, but you can also put any birthday money that a little kid receives into the college fund much easier than you can with older kids.
    We set a plan up for our daughter at our local credit union back when our state offered tax incentives. Now that the incentives have gone away to support “tax cuts”, I’d love to take advantage of the Vanguard option.

    1. Hi Emily,

      Yes, that is a good idea. All gifts received can be directed into the 529 plan.

      Yes, Vanguard is a good choice. What do you think about the Utah Educational Savings Plan? That is what I am leaning towards. Hoping to set it up for my daughter this year.

      The expense ratio is slightly better than Vanguard and they have a very good historic performance as well.

      What do you like or dislike about the Utah Educational Savings Plan? I would like to hear your thoughts / feedback.

      –Michael

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