Saving for College the Smart way - 529 Plans

Utah’s 529 plan, already one of the lowest cost options in the country, has dropped fees once again. It has also added a new investment option that focuses on international equities. The full press release is below:

(Salt Lake City) UESP continues to focus on the child by dropping fees and expanding investment options in conjunction with “National College Savings Month.” More money in their account now means more money for higher education later.

“It just got cheaper to save for college. Low costs and well-run underlying funds are important to investors when deciding how to save for a child’s higher education,” said Lynne Ward, Director of UESP. “The fee reduction and new investment option assist account owners, beneficiaries and UESP move closer to the shared goal of children receiving a higher education.”

“UESP makes it easy and affordable for Utah families to save for college. The Utah state tax credit and reduced fees provide an even greater incentive to start planning for your children’s future,” said Bill Sederburg, Commissioner of Higher Education.

Fee Reduction

Underscoring its already low-cost reputation, UESP is reducing fees again, providing individuals an opportunity to put more money toward future college expenses. The Administrative Asset Fee will be reduced 12%, and the Administrative Maintenance Fee is being lowered 25% on all investment options effective October 1, 2008.

The total range of Asset Fees on any UESP investment option will be 0.22% to 0.34%, which includes the Vanguard underlying expense ratios. The fee is assessed quarterly, on the last day of each quarter.

The Administrative Maintenance Fee will fall from $20 down to $15 annually. That is only $3.75 per quarter for accounts with $5,000 or more. Accounts with less than $5,000 are charged only 0.075% of the balance each quarter. The fee is assessed on the last day of each quarter.

Utah residents who invest in Option 1—Utah Public Treasurer’s Investment Fund are assessed no fees when saving for a child’s higher education. Additionally, the Administrative Maintenance Fee is waived for all Utah residents, regardless of investment option.

New Investment Option

A new static investment option with more exposure to international equity funds will be available to account owners October 1, 2008. This option results in the highest allocation in international securities of any current UESP product:

* 70% in the Vanguard Institutional Total Stock Market Index Fund (VITSX)
* 30% in the Vanguard Institutional Developed Markets Index Fund (VIDMX)

This new investment option (Option 10 Equities—30% International) will provide investors with greater access to the world market and growing regional economies.

The Vanguard Institutional Total Stock Market Index Fund seeks to track the performance of the MSCI U.S. Broad Market Index. The fund typically holds 1,200 to 1,300 stocks in its target index (95% of the U.S. Broad Market Index) and a representative sample of the remaining stocks.

The Vanguard Institutional Developed Markets Index Fund seeks to track the performance of the MSCI Europe, Australasia, Far East Index by investing all, or substantially all, of its assets between the Vanguard European Stock Index Fund and the Vanguard Pacific Stock Index Fund, based on the market capitalizations of European and Pacific stocks in the Index.

Visit www.vanguard.com to learn more about these underlying funds.

To learn more about the Utah Educational Savings Plan, call 800.418.2551 or visit www.uesp.org.

Texas has opened a new pre-paid college savings plan to replace the shuttered Texas Guaranteed Tuition Plan. The new plan is called Texas Tuition Promise Fund. Details are forthcoming, and you can read more on our Texas 529 plan page.

What better time than back-to-school time to think about saving for college.  Congress passed a resolution back in 2003 to make September College Savings Month.  It’s a time to reflect on your goals of saving for college.  Have you set up a 529 plan?  Are you contributing enough to the plan to meet your goals?

For more assistance setting up a 529 plan, be sure to visit the 529 plan guide.

If you invest in either of Wisconsin’s 529 plans, I’ve got good news for you.  Last week the plans received hefty increases in the maximum you can contribute over the life of the plan from $246,000 to $330,000.

Keep in mind that this number represents the maximum you can contribute.  If your investment earnings surpass these amounts you’re OK.

To read about the Wisconsin Edvest 529 plan or the Tomorrow’s Scholar 529, visit the Wisconsin 529 page.

Investor’s Business Daily, the international finance magazine, published an article yesterday about the benefits of 529 plans. The article discusses the tax benefits, in particular not having to pay federal (and sometimes state) taxes on your investment earnings.

As 529 plans grow in popularity you’ll see more and more of these mainstream articles covering 529 plans. And 529s are becoming more popular everyday. The article points out that there is now $112B in assets under management in 529 plans.

When it comes to tax benefits, you need to consider if your state offers benefits to you before looking at other states’ plans. Take a look at your state to see what it offers.