Client Portals

What’s The Best 529 Plan?3 min read

Oct 28, 2015 - John Osbon ( 4 mins to read)

If there’s a future college student in your household, you probably know that 529 is numeric for “tax-advantaged educational investment account.” But did you know that you can utilize the 529 of any of the 50 states? That’s a lot of choice, so which one is the best, meaning best for you? Morningstar has just released its annual survey, and our own analysis goes farther. Here’s what you need to know.

Control what you can

Beyond all the marketing language and state flag-waving you may find on state 529 web sites, three criteria fundamentally drive 529 performance:

  1. Cost of administration
  2. Choice of investments
  3. Cost of investments

State tax breaks are a distant fourth. Yes, some states like Rhode Island offer a tax benefit for residents who use the local 529, but the breaks are so small compared to the total cost of education that they don’t make a material difference.

And the winner is…

Based on these criteria it’s a three-way tie between Massachusetts, Nevada and Utah. Let’s take a closer look at what makes these three stand out from the crowd.

Cost of administration

It does cost money to administer a 529 plan. We just want to make sure you pay only what is necessary. Massachusetts, Utah and Nevada come in at 9, 17 and 19 basis points, respectively. These are all reasonable based on the value of the service provided.

Choice of investments

All three states offer a broad menu of index choices at rock bottom expense ratios. The three menus offer global diversification choices in equity and fixed income. You and/or your advisor can design the allocation that fits you best.

Cost of investment

Cost rules. Fees are one of the strongest predictors of performance, as Vanguard and others have documented. On average, lowest cost funds tend to do the best over time because they are…lower cost. Again, all three states offer the lowest cost index options, ranging from 10-30 basis points.

Thinking REALLY long term

Why is it so important to get these details about cost and choice so right in your 529? Will it really make that much difference? After all, you might say, the 529 goes away after the kids finish college.

Well, maybe not. In fact, there is a huge opportunity for a far-thinking family to establish an “endowment 529” for use by current and future family members. Always there, always escaping taxes, always ready for the next generation of learning. It’s not hard to do, only requiring that you wisely manage owners and beneficiaries. By combining a long time horizon and a sound investment plan, it can reach a size where it no longer needs funding. It just funds.

It’s hard to imagine a better use of personal assets. Call me (617-217-2772) if you would like to hear more.

PS – I’ve put in a few helpful links on common 529 plan questions:

Who is family?

Can I have plans in multiple states?

What are the rules for changing beneficiaries?

Should we change account owners?

What states offer tax breaks?

John Osbon-


delivered to your inbox


This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”

“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.

Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.

Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.

This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.

While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.

Adviser does not endorse the statements, services or performance of any third-party vendor.

Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.

Any IPO alerts are purely informational and should not be construed as recommendations to invest.

Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.

Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.