Morningstar has released their picks for the top five and worst five 529 college-savings plans. To make their choices, Morningstar “focused on diversification, fees, flexibility, and the underlying funds.”Here are the top five:
– Illinois Bright Start College Savings Program
– Maryland College Investment Plan
– Virginia Education Savings Trust
-Virginia CollegeAmerica 529 Savings Plan (broker sold)
– Colorado Scholars Choice Savings Program (broker sold)
The worst five:
– Ohio Putnam CollegeAdvantage (broker sold)
– Mississippi Affordable College Savings Program
– Mississippi Affordable College Savings Advisor Program (broker sold)
– New York 529 College Savings Program
– Nebraska AIM College Savings Plan (broker sold)
I’m a little concerned that New York’s plan is considered one of the worst. Not only do I have two funds under the plan (one for each child) I also said recently that it’s a good plan. The main criticism from Morningstar is that the plan doesn’t have any exposure to international funds so it’s been missing out on international gains and it’s not hedged against US economy downturns. Other wise Morningstar says it’s moderately priced and they like that it’s made up of Vanguard index funds.
Many people, like myself, contribute to their own state’s plans since it’s likely they get a tax break. But depending on the plan and state you may be better off contributing to another state’s plan.
The Wall Street Journal suggests the following when considering a 529 plan:
“• When shopping for a 529 plan, you should consider costs, investment options and asset-allocation strategies.
• Weigh any tax advantages of investing in an in-state plan against the plan’s total costs.
• Look for annual asset-based fees of less than 1% for direct-sold plans and less than about 1.3% for broker-sold plans.
Do you contribute to a 529 college-savings plan?
