March 2, 2007

529 College Savings Plans – a review by the Wall Street Journal

Posted in Saving for College at 8:40 AM by Joe From Boston


Here’s a helpful article from the Washington Post (paid subscription is required to view entire article) that rates the country’s 529 Savings Plans.

The Best and Worst 529 College Savings Plans

By Jane J. Kim

As more parents save for their children’s college education in tax-advantaged 529 plans, a new report aims to help them sort through the dozens of state plans by ranking some of the best and worst performers.

The report, scheduled to be released today by Morningstar Inc., found that the best plans, including ones in Utah and Virginia, offer low costs and well-run underlying funds. Both states’ plans have been on the Morningstar best-performance list since the investment research firm initiated its annual 529 survey in 2004…

…Congress gave a big boost to 529s last year by making permanent the plans’ federal tax breaks, which had been set to expire at the end of 2010. With 529 plans, investors deposit after-tax income into an account that typically carries a range of investment options, usually mutual funds. Distributions aren’t subject to federal income tax, as long as the money is used to pay for higher education. Competition among plans has prompted states and plan managers in recent years to cut fees and sweeten state tax breaks.

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