Lower 529 Fees

Physician's Money DigestJuly31 2004
Volume 11
Issue 14


Aftershocks from the mutual fund scandals are being felt in state-sponsored529 college savings plans. As regulators expand their probes to cover the fee andsales practices of these plans, some states are adding low-cost options and cuttingfees, with many moving away from offering only actively managed funds. Forexample, after a survey showed that two thirds of its residents did not use financialadvisors, Ohio added 15 low-cost Vanguard index funds to its menu of investmentchoices. The new funds can only be bought directly from the state's 529plan. Lower fund costs can make a big difference over time. Assumingan 8% average annual return over 10 years, $10,000 invested in a fund with a0.2% expense ratio will put $2244 more in your child's college tuition accountthan one that charges 1.4%.

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