Morningstar 2010 Best 529 College Savings Plans
Investment research firm Morningstar last week released its annal ranking of 529 plans. The 2010 survey covered 52 largest state-based college savings plans currently available. As it did in the past, Morningstar focused its research on key metrics of 529 plans, such as investment choices, performances, tax incentives and, mostly importantly, costs, when evaluating and ranking plans. As 529 plans continue to gain popularity among parents who want to save for their children’s future education(the total assets in 529 savings plans are $119 billion), plan administrators have kept improving their plans to make them more attractive. In the latest study, Morningstar noticed that 30 of the nation’s 82 plans have reduced fees in the past 18 months since its 2009 ranking was released.
Five plans were named 2010 Best 529 College Savings Plans by Morningstar. Among them, CollegeAdvantage plan, which I use for one of our daughters, has been recognized multiple times as the one of the best plans. Even though we can get tax incentives from Virginia Education Savings Trust (VEST) Plan, we continue to use CollegeAdvantage because we like the plan’s investment choices and its low-cost approach. Plus, the CollegeAdvantage referral program has helped us tremendously in the past couple of years.
- T. Rowe Price College Savings Plan and Maryland College Investment Plan: “Both of these plans are sold directly to college savers and are run by T. Rowe Price. They feature nearly identical asset allocation and underlying funds. These are two of the few direct-sold 529 plans that emphasize actively managed funds, rather than index funds. As a result, college savers pay more than they would for an indexed-only plan, but they’re getting a strong set of funds run by experienced managers.”
- CollegeAdvantage 529 Savings Plan: “This 529 plan, managed by the Ohio Tuition Trust Authority, mixes sought-after money managers from a number of firms. Vanguard runs a set of age-based indexed options, while another track of investments mixes active managers from PIMCO, Vanguard, Oppenheimer, and GE, along with some Vanguard index funds. Morningstar has found it’s usually more expensive to offer multiple firms’ strategies in a single 529 plan, but this plan’s total expenses are among the lowest for their respective strategies.”
- The Vanguard 529 College Savings Plan: “The cost of buying index funds in 529 plans went way down in 2010 when Fidelity first announced steep fee cuts within the plans it manages, particularly among indexed options. Vanguard–the industry’s leader in indexing strategies–has followed suit, though not for every plan it manages. The Vanguard 529 College Savings Plan, sold through the state of Nevada, features an expense ratio of 0.25% on its age-based options, making it a top choice for college savers. “
- CollegeAmerica: ”This Virginia-based plan is the nation’s largest, and it’s no wonder why. American Funds, a broker-sold family of funds known for its patient, risk-aware investing style, offers its complete lineup here for advisors to mix for their clients. Many broker-sold 529 plans are significantly more costly than their namesake mutual funds, but these are barely higher, and the funds’ long-term records are enviable.”
BTW, Morningstar has recently launched a new 529 College Savings Plans Screener to help parents research and compare hundreds of plans and funds. It’s a very nice tool, but you will need a Morningstar Premium membership to use it.
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