Paying for College – Top 529 Plans

January 28, 2021
Kristan Anderson, CEBS®, CFP® | Dir. Of Retirement Plan Services & Dir. Of Financial Planning
By Kristan Anderson, CEBS®, CFP® | Dir. Of Retirement Plan Services & Dir. Of Financial Planning

In this, the first in our series of blog posts around paying for college, we take a look at the Morningstar report regarding the top 529 College Savings Plans.

It is that time of year, when Morningstar releases its top 529 plans, based on new methodology in 2020. Notable changes from the previous methodology include the elimination of the performance pillar and state tax benefits for evaluation purposes, and a greater emphasis on the state’s stewardship and fees.

Out of the 61 state plans that received a rating, only three received the “best in class” Gold rating: Illinois’ Bright Start Plan, Michigan’s Education Savings Program and Utah’s my529. In their article about the top 529 College Savings Plans, Madeline Hume and Adam Millson note that, while it did not get a Gold rating in 2020, Virginia’s Invest529 was not far behind in the ratings. 

Virginia’s other 529 plan, the CollegeAmerica Plan moved down in the ratings from 2019, from Silver to Bronze, as a result of the increased emphasis on fees. Since the CollegeAmerica Plan is an advisor sold product, there are share classes that provide compensation to the named advisor. 

Other plans in our region, the Maryland College Investment Plan and D.C.’s College Savings Plan, received Silver and Neutral ratings, respectively. While the Maryland plan has retained a consistent rating, this is the first year that the D.C. plan has been reviewed. D.C.’s neutral rating should not be taken as a reason to not use the plan, especially in light of the tax benefit to people living in the district, which is not factored into the evaluation process. We have found that D.C. has made improvements in their investment options, which make the plan acceptable for most investors, especially up to the allowed D.C. tax deduction.

As a reminder, you can invest in any state’s investment-related 529 plan, using the balance for qualified education expenses without paying capital gains tax on the growth of these assets. This is different from the pre-paid 529 plans that are state-specific in their application. So, if you are wondering which state’s 529 plan to use, or how much to put aside for college costs, feel free to reach out and let us help you evaluate your options.

Meet Kristan Anderson, CEBS®, CFP® | Dir. Of Retirement Plan Services & Dir. Of Financial Planning »

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Hume, Madeline, and Adam Millson. “The Top 529 College Savings Plans of 2020.”

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