The Daily Item, Sunbury, PA

Business

June 3, 2013

A way to celebrate savings

(Continued)

     Thanks in large part to the Maryland 529 savings plan my husband and I invested in not long after she was born, we have the money we'll need -- tuition, room and board -- for her to attend the Honors College at the University of Maryland. We'll add that money to a scholarship she won from the university and she's set. No debt for us! We've also invested in a plan for our 15-year-old and 12-year-old.

     Based on data collected by the College Savings Plans Network from all 529 plans in the country, total investment by American families last year reached a record $190.7 billion, an increase of 15.7 percent from 2011.

     So what can you do to celebrate 529 College Savings Day?

     Become informed. Read Morningstar's annual report on 529s. It reinforces that you have to be mindful of a plan's performance, fees and investment options. Morningstar found that all 529 age-based investment options have posted gains for three-, five- and 10-year periods. Equity-heavy investments have posted the strongest gains following the upswing in the stock market of late. Bond and cash-heavy categories have posted slim annualized returns.

     Don't forget that fees matter. What you pay to have your 529 managed directly impacts your return. "Several states aggressively negotiated for lower-cost investments in 2012 as their 529 program management contracts were up for renewal," Morningstar said in its annual report.

     The research firm also noted that: "As has historically been the case, direct-sold plans dominated by index funds tend to be the cheapest in the industry, and adviser-sold plans tend to be the most expensive when measuring on an absolute basis."

     Celebrate 529 Day by determining how much you want or need to save for your child's education, says the College Savings Plans Network (www.collegesavings.org). Its college cost calculator will likely scare you to save no matter when you look at it.

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