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发帖数: 3374 | 1 Harry Sit
For the most part, 529 plans offer mutual funds as investment options. After
the financial crisis in 2008-2009, many 529 plans added more conservative,
guaranteed principal options offered by banks and insurance companies.
Because money in 529 plans is typically long term, these guaranteed
principal options sometimes offer attractive yields. They can be a better
deal than bond mutual funds because they don’t have interest rate risk.
These guaranteed principal options are especially good for students who are
already in college or about to enter college. When you are going to withdraw
the money in a few years, even bond mutual funds can be too risky. For
instance, the moderate-risk age-based portfolio for a student age 19 or over
in the Vanguard 529 plan (Nevada) lost money in 2015 (as of 12/22/2015).
Colorado’s CollegeInvest Stable Value Plus 529 Plan offers a stable value
fund by MetLife. The interest rate resets every year in December. The rate
guaranteed through December 31, 2015 is 3.09% after admin fees charged by
the Colorado 529 plan. The new rate for 2016 is 2.54% after admin fees.
The stable value fund is only guaranteed by MetLife. MetLife is rated Aa3 by
Moody’s and AA- by S&P. Although MetLife isn’t FDIC, I would be OK with a
guarantee by MetLife.
The interest rate offered by the MetLife stable value fund has been
relatively stable (pun intended). A Colorado state law about “the minimum
nonforfeiture rate for annuity contracts” might have something to do with
it.
You don’t have to live in Colorado to use Colorado’s 529 Plan. You can
have more than one 529 plans in different states for the same beneficiary (
for example one plan for stocks, another plan for fixed income). You can
transfer money from one 529 plan to another 529 plan once every rolling 12
months for the same beneficiary if you didn’t get a state income tax
deduction which requires a claw-back when you transfer out.
22 states either don’t have a state income tax, don’t offer a tax benefit
for 529 plan contributions, or offer a tax benefit whether you use an in-
state or out-of-state 529 plan. If you live in these 22 states, you are
completely free to use a 529 plan from any state: Alaska, Arizona,
California, Delaware, Florida, Hawaii, Kansas, Kentucky, Maine,
Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, North
Carolina, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and
Wyoming.
If you get a state income tax benefit for your in-state 529 plan
contribution, the benefit usually has an upper limit on your contribution.
If you are contributing more than that limit, the additional money can still
go to a 529 plan from any other state.
These guaranteed principal options are good alternatives to bond mutual
funds in 529 plans because they offer a competitive yield without interest
rate risk. If you currently have bond funds in an IRA and stock funds in a
529 plan, it could make sense to do a swap: sell bond funds in the IRA to
buy stock funds; sell stock funds in the 529 plan and put the money in the
stable value fund. |
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