with our Nebraska college savings plan 529. Its been ranked very highly for years. So far, so good. Also helps to get a little tax break on our state taxes. I've cut back on the contributions to lower some debt, but plan on getting back on track soon.

phillipandrew,

I keep reading the following about the Nebraska 529 plan:

Nebraska and non-Nebraska plan beneficiaries attending a Nebraska higher education institution are eligible to receive additional contributions from a privately-funded endowment fund.

I can't find any more information about the endowment fund. Do you know anything about this?

Savingforcollege.com has extensive research on all 529 plans in the country, including relevant fees, tax breaks, investment breakdown and performance, and comparisons to all other 529 plans. Unfortunately, all of this information is only available for those with a premium membership to the site. The good news is that the premium membership runs just $14.95 for one month, which is a small price to pay for figuring out the right place to have your money stored for your little one. My advice? Pay for one month, research the heck out of it for that one month, and make a very informed decision.

Since I live in Ohio, it is almost impossible for any out-of-state 529 plan to beat Ohio's CollegeAdvantage 529 Plan. The combination of investment diversity, state tax breaks, and super low investment fees make it truly an awesome choice for us Ohio residents.

Hope this helps!

Randy
Cincinnati, OH
SAHD to Ryder (23 months)

Randy,

It was interesting to read your post about what Motley Fool had to say about Nebraska. It's tough to figure things out because you get conflicting information. Morningstar and others usually rate Nebraska as one of the best.

I looked up the information and to get a "Vanguard Total Stock Market Index" through Nebraska's 529 plan, you pay $20/year and have an expense ratio of .65% . Not a great expense ratio for an index fund, but its still much lower than most managed funds. I tried to mimic Motley Fools Scenario of investing $10,000 for 10 years with a 5% annual growth rate. My spreadsheet showed that my fee's over the first 10 years would be $986.00 and my growth would be $5000.00. I am not an accountant so my numbers might be off.

I believe one of the big reasons everyone likes Nebraska's plan is that they use Vanguard funds.

According to The Motley Fool article, the expenses over 10 years for the cheapest option available in the Nebraska 529 plan is $1,025...very close to your figure of $986 over 10 years. Also, remember that Morningstar ratings are based solely on a fund's health and a fund's performance over time, not a fund's relative expenses. In other words, a very highly-rated fund can still have high fees. So, I don't think the information is conflicting between the sources.

If you want Vanguard funds and low fees, it would behoove you to take a look at Ohio's 529 plan at http://www.collegeadvantage.com. Ohio's 529 plan has absolutely no enrollment fees, no account maintenance fees, and expense ratios for the Vanguard portfolios below 0.40%. You would save a nice chunk of change in Ohio's plan versus Nebraska's plan over the 10 years.

Randy
Cincinnati, OH
SAHD to Ryder (23 months)

Why do various states have their own "state" plan, e.g., Nebraska, Ohio, Alaska, if they are open to someone from any state?

The state questions:

Independent 529 Plan. A prepaid tuition program designed to provide you with an opportunity to prepay undergraduate tuition for a beneficiary at participating private colleges and universities throughout the United States. By participating in Independent 529 Plan, you can pay for your beneficiary's tuition and certain fees today and lock in current tuition rates and a discount for your beneficiary's future enrollment at a Participating Institution. Independent 529 Plan offers the same federal tax advantages as the 529 savings plans originally specified by the Internal Revenue Code.

State-sponsored college savings plans. The value of these plans fluctuates with the markets. They can be used at eligible public and private colleges nationally and some colleges abroad. Some state plans offer state tax advantages in addition to federal tax advantages. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan. Qualified higher education expenses typically include: tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board; and certain expenses for "special needs" students.

State-sponsored prepaid plans. These plans are designed to allow parents to lock in today's tuition rates at eligible public and private colleges or universities. Qualified higher education expenses typically include tuition and fees at in-state colleges and universities. Some have provisions to include room and board.

With all 529s—both savings, and prepaid programs—there is no income or age limit for participation. You can even open an account for yourself.

How do 529 Plans vary?

529 Plans vary in a number of ways, including contribution limits to the account (defined by the sponsoring agent), fees to open and maintain an account, in-state tax treatments such as a state tax deduction, investment options offered, and the financial services company that manages the plan. There may also be other differences, such as special programs or benefits defined by the particular plan.

Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan.

Be Seeing You.

KPHart,
We also signed up for Upromise as well.

Eric

Check out my blog at www.ericstayhomedad.blogspot.com