A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Tuesday, August 02, 2005

Alternatives to 529 Plans

The 529 Plan is still a great way to save for college. Parents can sock a lot of money away and the account can grow tax free (for now). However, many 529 Plans are run mutual funds who have loaded them to the max with fees. To make matters worse, a lot of the plans are sold by commission-based brokers, who may or may not have your best interest at heart.

There are alternatives to 529 Plans as this article by Penelope Wang, writer for Money magazine, points out. The article talks about the Coverdell Educational Savings Account (formally the Educational IRA), UGMA/UTMA custodial account, and Taxable accounts.

Of the three, the Coverdell is my personal favorite since it operates like an IRA. Your investment options are virtually limitless and you can utilize low cost investment vehicles like exchange-traded funds and index funds - something you won't find in 529 Plans.

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