How to choose a 529 plan?

[JenzZx2]

So we're opening up a 529 for Taylor, and I've decided to go with Vanguard. Are all 529 plans fairly equal? Or is there pros and cons with going with different ones? How do you choose? I was thinking on the Vanguard 529 since we are military and who knows what state we'll be in when Taylor goes to college.

If any of you have started a 529, what did you go with and why?

Thanks for any info!! I'm so confused, but I'm ready to open one ASAP!

[JonsZX2SR]

Most repudable national brokerages are good choices. What you want to avoid is a local advisor who may not have complete or proper SIPC coverage. Also if you do get a rogue advisor the company will protect you which you won't get with a local private advisor.

I'd stay away from a firm tied to a narrow portfolio of investments. I don't know that much about Vanguard. Do they allow a full selection of investments besides their own ?? If not, a full service brokerage would still allow you to invest in Vanguard funds but allow greater flexibility.

Be wary that an investment advisor will tell you this isn't important and try to steer you to something that benefits themself rather than your family. also look at a Coverdell (http://www.irs.gov/taxtopics/tc310.html) account as well as the 529.

I've had good luck with TD Ameritrade and Fidelity. Schwab is also good. Smith-Barney is another choice. I have accounts with three of the above and my wife has a Smith-Barney account. However, you have to make the decision based on your own experience with local advisors.

I'm glad you are doing this, I have advised family and friends along these lines and only a few took the time. You and Drew have a lot of good sense.

{Note that if you are planning to return to (veterinary) school in the future there are ways to set up an educational investment acct. for yourself. The money needs to be spent on a close family members education, not just your children's.}

[LunchBoxZX2]

Generally you try to pick a 529 plan with a sponsor in the state you live in for tax breaks... some of them are pretty large. Obviously with military and not really knowing where you're going to be, it makes it harder. The main thing to do is look for a reputable name. Most 529's these days don't care what school your child goes to as long as it's an accredited school.

Most 529's have "target" portfolios, which vary their level of aggression based on how much time you have until the child is of college age. Obviously with Taylor being a baby, the target fund for that age would be fairly aggressive because it can afford to be with a longer time horizon. American Funds, Vanguard and Alliance Bernstein (CollegeBound Fund) are popular, as are many state sponsored plans.

See which plan has the lowest overall internal expenses while maintaining a good investment mix, and if you get to use your tax breaks, you've got icing on the cake. Don't be afraid to step into a local major brokerage firm office... I think you would be hard-pressed to find one that will ever charge you for opening a 529 account. There are also other alternatives to 529's, such as straight educational IRAs and UTMA, or Uniform Transfer to Minors Act accounts.

Sit down with a professional and go over your needs and see what fits best.

[TheCrazyGuy]

Optimally, a 529 and a Coverdell would be the way to go; 529s being the tax-deferred option. Most 529s are very similar, but you can pick the risk of your investment at the outset. Be aware that you will be paying a fee on the account, as well.

The good news is that if Taylor doesn't go to college or gets a full ride, then you can use the other 529 for another child, for Drew, or for yourself. Also, you can change the beneficiary to another relative OR save it for your grandkids and change them to the beneficiaries (if it so happens). Any money saved is better than no money saved.

[JonsZX2SR]

The important thing is you are starting now rather than waiting. Too many people put this off then get clobbered by the cost of helping with the cost of their children's education.

[JenzZx2]

Well, it's done. I ended up going with the Vanguard 529.. it's not for a specific state, but we don't know where we will live, or where she will go to college. The account fees are minimal, no annual fees as long as there is the minimum requirement in there. I opened it up with the minimum plus a couple hundred for wiggle room, with quarterly deposits.

Kinda scary! But cool. Next I have to research one for us in general.