California 529 Plans?

[jenn_jenn]

I was asked to research 529 plans in California.

Background:

The child is 14 years old, does not want age based, wants 100% investment in the US or international stock markets.

Does not want merril lynch, fidelity, vanguard , or Nebraska.

Needs to be low fee.


I have no experience with 529 plans and just googling is a little overwhelming as there are so many options. Thought maybe someone here who has gone through the process could offer some insight. Thanks!

[jpg7n16]

I was asked to research 529 plans in California.

How do you mean, "you were asked?" Is this a school project? What's prompting you to look into 529 plans?

Does not want merril lynch, fidelity, vanguard , or Nebraska.

Needs to be low fee.

Why? You want low fee, but can't be at firms that specialize in low fees??

Why would you limit your options for where to look?

I have no experience with 529 plans and just googling is a little overwhelming as there are so many options. Thought maybe someone here who has gone through the process could offer some insight. Thanks!

Google isn't overwhelming - you just have to know what you're looking for I just did a search for "California 529"

https://www.google.com/#sclient=psy-ab&hl=en&site=&source=hp&q=california+529&pbx=1&oq=california+529&aq=f&aqi=g4&aql=&gs_sm=e&gs_upl=1048l4187l0l4442l14l11l0l3l3l1l391l2898l2-3.6l12l0&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=c415ab21b0a0eedd&biw=1280&bih=941

First result is the California Scholarshare program (the official site of the California 529 plan): ScholarShare College Savings Plan

Or how about "low fee 529" : https://www.google.com/#hl=en&sugexp...w=1280&bih=941

1st result: 529 Fee Study


2 simple searches and now you have the info for the California specific plan, as well as fee information for all states.



Digging into the official site a little more: click "Investment Portfolios" from the top, then the link for "Reivew Fees and Expenses": Fees and Expenses : ScholarShare College Savings Plan

Now you have all the options for the investments of the plan and can search for the lowest cost options.

From the FAQ section (Frequently Asked Questions : ScholarShare College Savings Plan ), you can find that California uses TIAA-CREF for their program - which is not on your list of unusable firms.

[MonkeyMama]

I just had to add that there is no tax incentive for California residents to stick with a California 529 plan, so basically means you can choose any 529 plan. Pretty much, no need to limit yourself to a "california" specific plan.

From there, I'd google "best 529 plans" to get an idea.

For example:

Best 529 College Plan of 2011 - CBS News

[jenn_jenn]

Thank you very much for your response. I've been googling for the past hour or so, and had actually already viewed those links. It is overwhelming because I have no experience with any sort of investment planning and don't want to make a mistake. I initially thought you had to stay within your state but quickly found out that you do not have to. I tried to change my title but couldn't. It does not have to be a California plan, especially because California does not offer a tax break & there are no direct benefits of having a California plan so I am open to going outside California plans.

The reason for being asked and the listed requirements: I am a personal assistant for someone, normally it's things like grocery shopping or small errands, help with planning a party or trip but I was asked in an email to research 529 plans that meet the criteria listed in initial post. I'm a college student and don't have any experience with this but I am interested in finance and have been a long time stalker of this board so that's why I figured it couldn't hurt to ask here.

Thanks again for your help. Still on a quest, it seems the ones that have decent ratings, other than Nebraska which has poor ratings, are on the "no" list which makes it a little more difficult.

ETA: Thanks MonkeyMama, I took too long to write out this response so hadn't seen yours. I'll continue my google search.

[disneysteve]

Check out The Internet Guide to Funding College and Section 529 College Savings Plans. Savingforcollege.com. I think that's the best site around for researching college saving options.

[jpg7n16]

When you look through the California listing, the stock index options are only 0.18%/year (Fees and Expenses : ScholarShare College Savings Plan )

On a $10k investment, that's $230 for 10 years - which according to the fee study is one of the lowest cost options nationwide. (Fee study from link above, is through the same site DS mentioned)

Plus none of the following:

• Application Fee
• Cancellation Fee
• Change in Beneficiary Fee
• Change in Investment Options Fee

So meets all your criteria:

• not at listed firms: check
• 100% stock fund available for investment: check
• low cost: check

If you're presenting options, I'd prob find maybe 1-2 other plans, and present them together. But IMO, tax deduction or not, the Cali plan has everything you need.

[Like2Plan]

I was asked to research 529 plans in California.
Background:
The child is 14 years old, does not want age based, wants 100% investment in the US or international stock markets.
Does not want merril lynch, fidelity, vanguard , or Nebraska.
Needs to be low fee.
I have no experience with 529 plans and just googling is a little overwhelming as there are so many options. Thought maybe someone here who has gone through the process could offer some insight. Thanks!

100% investment in stocks for a 14 yr old is a pretty bold strategy especially with the current volatility in the market.

[disneysteve]

100% investment in stocks for a 14 yr old is a pretty bold strategy especially with the current volatility in the market.

I agree. That's pretty high risk gambling with money that you'll need to start tapping in 4 years.

[MonkeyMama]

Yeah, unless I had a huge windfall, or needed the shelter for financial aid, I wouldn't put that money in a 529 plan, either. Only the earnings are tax sheltered and I wouldn't expect a 14-year-old to make enough earnings to make a significant tax impact. At face value, it's not good tax strategy.

I was thinking it sounded like a horrible idea, but I don't think the OP has much sway in that part - the info is not for her.

But I think it's good to point our for other readers of the thread. Yes, the 100% in stocks is probably even more disturbing.

[disneysteve]

Only the earnings are tax sheltered and I wouldn't expect a 14-year-old to make enough earnings to make a significant tax impact. At face value, it's not good tax strategy.

I'm not so sure. A 14 year old may not graduate high school until 2016 so you've got over 4 years before the first possible withdrawal of these funds and if grad school is planned, it could be 2024 before the money is all spent. Even with a relatively conservative portfolio, earning 4 or 5% per year for 12 years could rack up some decent earnings if the principal is significant. Why pay taxes on that money if you don't have to?

[MonkeyMama]

I'm not so sure. A 14 year old may not graduate high school until 2016 so you've got over 4 years before the first possible withdrawal of these funds and if grad school is planned, it could be 2024 before the money is all spent. Even with a relatively conservative portfolio, earning 4 or 5% per year for 12 years could rack up some decent earnings if the principal is significant. Why pay taxes on that money if you don't have to?

I don't disagree - I said *unless they had a huge windfall* (meaning a large amount of principal).

In general, starting a 529 plan at age 14 is not a good tax strategy unless you come into some money. Otherwise, you probably should have started the 529 plan a long time ago, or you don't have enough income or assets to get any benefit from it. Just in general. There are certainly exceptions. Just strikes me as odd, all around, without knowing more about this situation.

[jenn_jenn]

Yep, I don't have any sway in the investment strategy...not my money! It is not what I would do but I know my boss is very smart and he knows what he is doing. I don't want to dive into the details as they are not mine to share but while this would not seem practical for most, I think the attraction to the 529 is the opportunity for a tax shielded investment and is not necessary to fund his son's college tuition.

[Like2Plan]

I don't want to dive into the details as they are not mine to share but while this would not seem practical for most, I think the attraction to the 529 is the opportunity for a tax shielded investment and is not necessary to fund his son's college tuition.

You are right, this does not make any sense to me. If your boss uses a 529 plan for other than college the gain will not only be taxed but there will be a penalty on top of it....

[jenn_jenn]

You are right, this does not make any sense to me. If your boss uses a 529 plan for other than college the gain will not only be taxed but there will be a penalty on top of it....

The money would of course be used to fund his tuition, otherwise as you said the penalties would kind of negate the point of it. What I meant was the 529 is not a necessary savings vehicle to fund his son's college tuition but since the option is there, might as well take advantage of the tax shielded opportunity.