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Fees Dropping on 529 College Savings Plans

Jul 24, 2012

It's every parents wish to send there children to college. The 529 plan has been a great tool to save for college in a tax efficient way. Like all investment accounts there are administrative fees. Recently, many 529 plans have been reducing the fees. When the amount you pay for fees drops that means more money stays in your pocket.

Why are expense fees dropping?


Because we have a choice of so many 529 plans each state keeps an eye out for what another state is charging in expense fees. When one state lowers their fees another state notices and does the same to stay competitive. Companies that run the 529 plans for the state are told how other states are lowering their fees. A state does not want their 529 plan to listed as expensive in the media so down comes the fees. It turns into a domino effect and the public benefits.

How much are fees dropping?


According to mutual fund rating company Morningstar, one plan that had a price of 0.6 percent lowered their fee to 0.2 percent. It doesn't seem like much but if you figure $5,000 to start and investing $100 for 11 years your going to have $500 more money in the account.

How do dropping prices impact 529 purchases?


Any investment advisor will tell you just because something is cheap, it doesn't mean it's good. A low fee schedule must also be considered along with the investment's tax benefits, investment quality, and investment manager experience.

Finding the right balance between fees and investment quality will help you meet your goals for a substantial 529 plan that's ready when college time arrives.



Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.com. Want to be heard? Leave a reader comment below.

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