Wednesday, November 3, 2010

The Best 529 Plan Goes to... West Virginia!

By Arianna Capital

Saving for college can be quite an endeavor. Luckily, this article will aide anyone looking to pursue a college degree. There are several options like the Coverdell ESA, UGMA/UTMA, or the 529 plan. We will focus on the 529 plan today.

A Little Bit About 529s
Nearly every state has a 529 named for the IRS code that brought them about. The funds can grow tax free if used to pay for higher education qualified expenses. They can also be used to pay for thousands of post-secondary education across the globe. However, not all 529s are the same.

The West Virginia Award

After scouring the nation for the best option to help our clients save for their kids' future payments we found a diamond in the rough - West Virginia 529. It is special for several reasons. First of all it has low fees. This is an extremely important factor when searching for investment options. Secondly, West Virginia offers DFA funds. In previous posts we have written about the academia and science behind these funds. They don't try to offer the next best flavor of the month. Instead, they control what they can control in taxes and fees, and they let markets work for an expected return for providing financial capital. I have yet to come across better funds. Third, they are very simple to use. We all have busy lives. It may happen that we forget to rebalance the portfolio, or the child gets closer to college-age. Enter the age-based portfolio option, like that offered by West Virginia, which automatically does all of this for us.

Other Tips
When selecting a 529 plan there are three other things you need to watch out for.
1. Always buy a direct plan. Advisor sold plan only create wealth for the advisor. West Virginia makes it so easy that an advisor is really not necessary here.
2. Look for a state tax break. If your state gives a tax deduction or credit for contributions, look at home first. If the fees aren’t too much higher than West Virginia's, the value of the tax deduction or credit may outweigh the higher fees. In Texas, this is a mute point.
3. Consider an age-based option. This aids the values of simplicity and diversification.

Investing in 529's is a wonderful idea when planning for college to achieve tax-advantages returns. Make sure you choose carefully and watch out for costs and emotional decision making.


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  2. Thank you very much Stave. If there is any way that we can help you, or if there are any topics you are interested in, please let us know.

    Ramin Baranpourian