| If you're like most parents, saving for your | | | | best for you and your children?Choosing a 529 |
| children's college education is a priority and a big | | | | PlanAll plans are sponsored by individual states, but |
| challenge. Tuition and related costs at both public | | | | are typically available to residents of other states. |
| and private universities have been rising at 5% | | | | Some states offer residents a state income tax |
| per year or more, far exceeding the rate of | | | | deduction for contributions to their own plan. So, |
| inflation. To put that into perspective, a child born | | | | for residents of these states, that is the way to |
| in 2006 should plan on $110,000 in total expenses | | | | go. For those without that tax incentive or |
| for four years at the average in-state public | | | | residents of states without an income tax, you |
| college; $300,000 for four years at a private | | | | can choose from just about any of the available |
| university.Financing these costs for one or more | | | | plans.Be aware that many 529 plans are heavily |
| children is going to take planning and, most | | | | promoted by brokerages and other financial |
| importantly, disciplined savings. Tax-advantaged | | | | institutions and can carry large and completely |
| "529" College Savings plans are the savings vehicle | | | | unnecessary sales charges. Go with a plan with no |
| of choice and offer important advantages over | | | | sales or other load charges. Typical annual fees |
| other options. A $3,000 annual contribution, | | | | for asset and account management combined |
| beginning at birth, to a growth-oriented 529 plan | | | | should be 1% or less.Recommended 529 |
| should pay for one child's in-state public education, | | | | PlansThere are at least a dozen excellent options |
| and a $7,500 annual contribution for a four-year | | | | to choose from. Among these, we like the TIAA |
| private education. A later start means higher | | | | CREF-managed plans (California and others) and |
| annual contribution amounts.529 Plan Advantages- | | | | the Vanguard-managed plans in Iowa, Nevada, |
| Large Tax-Free Contributions: Parents, | | | | New York and Utah. The Vanguard plans, with |
| grandparents, other relatives and even friends can | | | | their index investment strategies, have operating |
| contribute up to $12,000 per year per child, | | | | costs of less than 0.75%. A new entry is the |
| tax-free, to a 529 plan.- Tax-Free Earnings and | | | | Alaska plan managed by T Rowe Price. It offers a |
| Distributions: All earnings in a 529 plan are | | | | choice of first-rate actively-managed funds and at |
| tax-free. Distributions are free from all federal | | | | relatively low cost.No matter which plan you |
| income and most state income taxes when used | | | | choose, we strongly recommend an "age-based" |
| for tuition or other qualified college expenses. This | | | | investment strategy. These strategies range |
| makes 529 plans as powerful as Roth IRAs for | | | | from Conservative to Aggressive. Age-based |
| long-term savings.- Donors (parents, grandparents, | | | | programs are dynamic asset allocation programs, |
| etc.) "own" the 529 assets: Unlike a custodial | | | | similar to Target Retirement date funds. They are |
| account that typically becomes the minor's | | | | heavily invested in stocks when your child is |
| property at age 18, 529 plan assets are always | | | | young, gradually converting to more fixed-income |
| under the control of the donor.- 529 plan assets | | | | and cash as college age approaches. This |
| are more advantageous for financial aid | | | | approach protects against the risk of a major |
| considerations: Plan assets are counted at a 5.5% | | | | stock market downturn just as the funds are |
| rate by college financial aid offices, compared to | | | | needed.With over 31 years of investment |
| the 35% rate used for custodial account assets.- | | | | experience, Martin Weil, Registered Investment |
| Unused funds in a 529 can be rolled over to | | | | Advisor and Principal of MW Investment Strategy |
| another child's benefit.Have I caught your | | | | Group, helps busy professionals and their families |
| attention? Now the question is which 529 Plan is | | | | achieve their long-term financial goals. |