Morningstar Lists Best 529 College-Savings Plans - East Idaho News
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Morningstar Lists Best 529 College-Savings Plans

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GETTY B 101612 CollegeSavings?  SQUARESPACE CACHEVERSION=1350384187776Hemera/Thinkstock(NEW YORK) — Investment ratings firm Morningstar released its annual ranking of 529 college savings plan on Monday, noting industry-wide improvements in plan fees and performance.

Almost every state offers a 529 savings plan, named after Section 529 of the Internal Revenue Code, describing how those who contribute to these investment vehicles don’t have to pay taxes on proceeds.  Benefactors, such as parents and grandparents, can start a plan for named beneficiary as soon as a child is born.

While you do not have to choose a 529 savings plan offered in your state, many states offer tax breaks if you do invest in their plans.

Laura Lutton, director of Morningstar’s fund research group, said if you are going to consider a 529 savings plan for a child, it’s best to start early, given the accelerating cost of college and the fact that there are relatively few years to save, compared to retirement or other savings goals.

If you live in a state where there are tax benefits, in most states you’ll give up those benefits if you choose another state’s 529 plan.

Only five states allow you to apply that state’s tax benefit to any 529 plan, regardless of its origin.  Those states are Arizona, Kansas, Maine, Missouri and Pennsylvania.

Morningstar.com’s 529 Plan Center features an interactive map that lists each state’s plans and its tax benefits.  For example, Ohio has two 529 plans that offer $2,000 in-state tax deductions for single or joint filers.

This year’s list of the best plans are described by a new ranking of gold, silver, bronze, neutral and negative to match Morningstar’s analyst ratings for mutual funds, so the descriptions can be more clearly interpreted for different investment vehicles, a spokesman said.  In previous years, Morningstar rated ranked plans in several tiers: top, above average, average and below average.

The rankings are based on characteristics like price and performance, which allow analysts to estimate which plans are more likely to outperform over the long term on a risk-adjusted basis.

The 27 plans that received medals represent more than 95 percent of the $162 billion in 529 plan assets in the country.

Here is a list of the four gold plans and four silver plans Morningstar selected this year:

Gold
T. Rowe Price College Savings Plan
Program Manager: T. Rowe Price Associates, Inc.

Gold
Maryland College Investment Plan
Program Manager: T. Rowe Price Associates, Inc.

Gold
Utah Educational Savings Plan
Program Manager: Utah Educational Savings Plan

Gold
The Vanguard 529 College Savings Plan
Program Manager: Upromise Investments, Inc.

Silver
iShares 529 Plan
Program Manager: Upromise Investments Inc.

Silver
Michigan Education Savings Program
Program Manager: TIAA Tution Financing, Inc.

Silver
CollegeAdvantage 529 Savings Plan
Program Manager: Ohio Tuition Trust Authority

Silver
CollegeAmerica
Program Manager: American Funds

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