Thumbs Down: Red Flags on 529s

Tip:

If you're bothered by the idea of abroker charging you a fee to enrollyou in a Section 529 plan, which youcould buy into for free on your own,join the club. Both Congress and theSEC are looking into some dubioussales practices in connection withthese state-sponsored college savingsplans. One issue is fees. Quite often,the expenses tacked onto 529 investmentscan wipe out any tax advantagesthat the plan offers. Brokerswho hawk out-of-state plans withoutadvising clients about possible taxbreaks they would receive by puttingmoney into their own state's plan arealso under scrutiny. If your stateplan doesn't come with any taxbreaks, look for an out-of-state planthat offers low-cost funds likeVanguard and TIAA-CREF.