Archives for December 2, 2014

Morningstar Top 529 College Savings Plan Rankings 2014

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Investment research firm Morningstar has released their annual 529 College Savings Plans Research Paper and Industry Survey. While the full survey appears restricted to paid premium members, they did release their top-rated plans for 2014. Remember to first consider your state-specific tax benefits that may outweigh other factors. If you don’t have anything compelling available, you can open a 529 plan from any state.

Morningstar uses a Gold, Silver, or Bronze rating scale for the top plans and Neutral or Negative for the rest. The criteria include five P’s:

  • People. Who’s behind the plans? Who are the investment consultants picking the underlying investments? Who are the mutual fund managers?
  • Process. Are the asset-allocation glide paths and funds chosen for the age-based options based on solid research? Whether active or passive, how is it implemented?
  • Parent. How is the quality of the program manager (often an asset-management company or board of trustees which has a main role in the investment choices and pricing)? Also refers to state officials and their policies.
  • Performance. Has the plan delivered strong risk-adjusted performance, both during the recent volatility and in the long-term? Is it judged likely to continue?
  • Price. Includes factors like asset-weighted expense ratios and in-state tax benefits.

Here are the Gold-rated plans for 2014 (no particular order):

  • T. Rowe Price College Savings Plan, Alaska
  • Maryland College Investment Plan
  • Vanguard 529 College Savings Plan, Nevada
  • Utah Educational Savings Plan

Here are the consistently top-rated plans from 2010-2014. This means they were rated either Gold or Silver (or equivalent) for every year the rankings were done from 2010 through 2014.

  • T. Rowe Price College Savings Plan, Alaska
  • Maryland College Investment Plan
  • Vanguard 529 College Savings Plan, Nevada
  • CollegeAdvantage 529 Savings Plan, Ohio
  • CollegeAmerica Plan, Virginia (Advisor-sold)

I collected the previous individual year rankings from 2010-2013 last year. Utah only missed on out the consistent list because they weren’t top-ranked in 2010.

Again, either you go for the in-state tax savings, or pick a top plan from any state. Ignoring state tax differences, my standard recommendation is to pick either Nevada or Utah, although many other state plans may have specific investments that will work just fine. The Vanguard-branded 529 Plan has low costs, decent investment variety, and a long-term commitment to passing on future cost-savings. The Utah 529 plan has very low costs and is highly customizable for DIY investors.

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