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529 plans react to investor concerns

by Grace

Some 529 plan sponsors are reacting to parents concerned about recent market volatility and losses in their accounts.

Several states are making changes to their college-savings plans, hoping to keep parents from making a market-driven exodus.

Arizona, Delaware, Massachusetts, Nebraska, and New Hampshire are adding investment options.  Some of the new funds have higher than average fees, a reminder that simply adding more choices is not necessarily better.

“The bottom line is more choice at the potential cost of more confusion,” says Joe Hurley, founder of SavingforCollege.com, which tracks 529 plans.

The Wall Street Journal

Posted on October 25, 2011 at 5:05 am in personal finance, saving for college   |  RSS feed

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4 Comments to “529 plans react to investor concerns”

    
  1. gasstationwithoutpumps
    October 25, 2011 at 12:36 pm

    California, which several years ago switched their plan from TIAA CREF to Fidelity is switching back this year. When the first switch happened, the “guaranteed” option was closed to new investment. With the switch back, it is going away entirely. (The “guaranteed” option is the only one of the funds that has done well for the consumer, so of course they wanted to get rid of it.)

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  2. Grace
    October 25, 2011 at 4:58 pm

    Interesting about California terminating the guaranteed investment option. Surely during these turbulent times it would be one most desired by many parents. However, I can see where the actual guaranteed return would be so low, because of interest rates and other factors, that the plan sponsor believes it would simply attract very few investors.

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  3. gasstationwithoutpumps
    October 25, 2011 at 9:00 pm

    Actually, I think the problem was the opposite—the old guaranteed rate is hard for them to make money at, and they want to kill off the old obligations.

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  4. Grace
    October 26, 2011 at 9:33 am

    Yup, makes sense. They probably tried to protect themselves by locking in rates for expected sales, but then the rush from investors to buy into the guaranteed option was just too much.

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