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Best 529 College Savings Plans

Last update on: Mar 15 2020

Morningstar is out with its annual ranking of section 529 college savings plans. These are plans that qualify for a slew of tax benefits under section 529 of the tax code. I’ve written about the plans in detail in the past. They’re great estate planning tools and provide an excellent way to sock money away for a child without losing control of it. The Morningstar rankings also are well done, focusing on low costs, flexibility, and investment performance of the options. There aren’t any surprises among the funds in the top categories. My state of Virginia has a plan that is a perennial favorite of Morningstar’s and is in the Silver category this year.

All told, Morningstar awarded medals to 32 plans in 2013, up from 27 in 2012. The increase in the number of medalist plans reflects significant improvements to 529 plans. Plans that improved their ratings in 2013 increased the likelihood of college savers’ success by upgrading the quality of the plans’ underlying investments, cutting expenses, and/or improving state tax benefits.

Similarly, very few 529 plans still include options that have performed poorly due to weak management or extremely high fees. As such, only four of the 64 plans rated earned Negative ratings, with 28 plans earning Neutral ratings. Morningstar did not rate 21 of the industry’s smallest plans.

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