Parents saving for their children’s college expenses may be in need of a reality check.
While Massachusetts families expect to pay most of their children’s college costs, the typical family comes up well short of they money they need by the time college rolls around. To make matters worse, most parents also have wildly unrealistic ideas of what their graduates will earn after college, especially those who nudge their children toward a particular major in hopes of a big paycheck that can help work off school debts.
Comments
529 Plans seem attractive, and in all fairness, I haven't followed them since my kids went off to shcool, but the returns were really pretty poor and it was almost impossible to figure out what types of investments were held within them. If I had to do it over I'd invest in a index mutual fund, pay the taxes on the gains. At least there would be gains and lower management fees.
529s have the advantage of growing without taxes on the gains, and having much less negative impact on financial aid eligibility than if the parent or child owns the money directly. But I agree they purposely made opaque by Fidelity so you can't see that the mgt fees are actually going to take 1/3 of the gain over the lifetime of the investment. Also they don't make their best funds available to 529 plans. And they limit the # times you can move the money to different funds - so if you're trying to move from stocks to bonds before a market dip - you're out of luck. In short, 529s are ok for parents, but great only for Fidelity. Fidelity sucks.