Are 529 Plans The Best Way to Save for College?

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Feb. 18 (Bloomberg) –- On today’s “The Paybook,” Adviser Investments Co-Founder & CEO Dan Wiener discusses some of the best ways to save for college with Carol Massar on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

Going into these plans and so is a lot of people who think they are a good idea.

It is a ton of money but only a statistic that the average account has about $20,000 in it.

That is not going to take you very far for college.

That is interesting.

You know the benefits that are out there.

They talk about the tax advantages of that.

That is true?

Up to a point.

The real tax advantage of the 5.9 plan -- 529 plan is the planning.

The big benefit for the plan is for wealthy parent or wealthy grandparent to put $120,000 away with their spouse immediately.

Put that money in when the kid is still swaddled.

You are going to need time to build enough money to pay tuition down the road.

The problem with a lot of these plans is that the options they have are not very good.

The performance is not really good.

For me, it comes down to performance.

If you look at performance and track against other investments, that tells me clearly whether this is a good idea or not.

The whole notion that you invest for college 18 years out and you will put it into a bond fund, you are never going to get there.

Unless you start with $140,000 then it is great.

It takes it out of the wealthy person's estate and gives it to the grandchild or child or what have you.

The options are terrible.

I much prefer the idea of getting your kids money, as much as you save, into a very aggressive equity fund and just let it ride.

What are some of the funds you are suggesting?

I did this for my kids way back when they were getting ready to save before college.

I put it with a fund called vanguard capital opportunities.

The manager still run something called rhyme cap odyssey growth fund.

Low fees.

You have to put your money into an aggressive fund if you are going to make enough to pay for college.

What about the tax consequences?

The notion of all these tax savings is good up to a point.

If you find a good growth fund, you will more than make up in performance plus some what the taxes might take away from.

I don't let the tax tail wag the dog in any of my investments and i can say with certainty that i would do better putting it into this growth fund outside of the 529 wrapper.

Are there some plans that could make sense because you suit -- udc the performance?

They are not well managed.

The best is to go for a very low cost index option.

In new york, you have two options.

You have a list of vanguard index funds and portfolios.

They run about 17 basis points.

You also have what they called an advisor option for anywhere between 70 and 90 basis points and the performance is worse.

There is no reason you want to put your money into an advisor plan.

Any other funds?

I am a big believer in having an overweight in health care.

Vanguard health care funds is the other fun that i weren't -- my own for my kids.

Low fees and great performance.

You talked about forest labs, vanguard's fund is the largest shareholder in forest labs.

We will see a big pop tonight.

Any other funds?

The only other one i would add is vanguard dividend growth.

Low cost, battleship companies.

You to think about when you're planning for these investments.

Potentially the amount that you do stack up or add up could affect your financial aid, could it?

It could.

As long as it is in the plan, it would not affect your financial aid too much.

Again, states, colleges, everybody has a different plan.

You need to know what is going on and not only in your own state, but you have to know what is going on in the other 49. the bottom line is checked and that there are options out there.

Thank you so much.

Coming up, david beckham but

This text has been automatically generated. It may not be 100% accurate.


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