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Professional advice may be worth the higher cost, especially if a family already has a financial planner they trust, says Andrea Feirstein of AKF Consulting Group, an adviser to dozens of states offering 529 plans. But she says direct-sold plans may be a better option if you don't have that adviser relationship or are fairly new to investing. Here are four other circumstances where the higher costs of adviser-sold plans may be justified: 1. YOU COULD MISS OUT ON TAX PERKS Parents aren't limited to signing up for their own state's 529 plan, but two-thirds of the states extend state tax deductions or credits to residents enrolling in their 529s. Those state incentives may be sufficiently generous to offset the higher fees charged, if your state is one of the few offering only an adviser-sold plan. 2. YOU WANT TO TRY BEATING THE MARKET A key reason that direct-sold plans are less expensive is that they're far more likely to include low-cost index funds. Adviser-sold plans are primarily limited to actively managed funds, which aim to outperform the market, rather than match an index. A wealth of research shows that most managed funds fail to consistently beat the market. Investors who choose an index approach should understand that they'll be giving up the chance to beat the market. 3. YOU'RE NOT A DIYer If you're not the type to manage your investments, an adviser-sold plan may be a better option. That's especially true if you choose a plan that's not age-based. These increasingly popular 529 plan options are similar to target-date mutual funds geared toward retirement. Age-based 529s take a set-it-and-forget-it approach, automatically adjusting to fewer stock funds and more bonds to reduce risk as a teenager approaches college enrollment. 4. YOU'RE A PROCRASTINATOR If you're chronically slow to plan for your financial future, an adviser can provide impetus to act. "The worst thing for somebody to do is nothing, when they should be saving for college" says Joe Hurley, founder of the website Savingforcollege.com. "If an adviser is what you need to get moving, then you may want to swallow the extra costs involved." ___ Link to Coalition for Mutual Fund Investors study on cost differences for direct-sold vs. adviser-sold plans: Link to Morningstar's latest annual report on 529 Plans: ___
http://tinyurl.com/8628653
http://corporate.morningstar.com/us/pr/529-PaperUpdate.pdf
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