By Abigail Warren, Fall 2017 IAC Student Intern
We all know the saying, “There ain’t no such thing as a free lunch.” Well, unfortunately, that also applies to investing money for college savings. 529 plans come with fees that vary between states, within plans, and among investment options. For the most part, 529 prepaid tuition plans come with enrollment and administration fees. On the other hand, most 529 college savings plans charge enrollment fees, annual maintenance fees, and asset management fees, which vary among investment options. Some plans also have a deferred sales charge, that you pay when you withdraw the money.
Annual distribution fees are an additional fee that generally goes to the broker, and can range from .25% to 1% of your investment. Fees in a broker-sold account vary depending on the share class. For more information on the share class, including fees, and questions to ask before investing in a 529 plan check out this from the SEC.
The SEC says you can reduce the amount you pay in fees by buying directly from the state without the assistance of a broker. If you choose to buy through a broker and meet or exceed threshold amounts, you might qualify for a breakpoint discount, which reduces your front-end sales load. Some states will waive or reduce fees if you have a large account balance or an automatic contribution plan, or if you are a resident enrolled in that state’s plan.
For more information on fees and a description of the program, check out the the program’s offering circular or prospectus contains. You can also compare 529 plans using FINRA’s 529 Analyzer tool.