The other day I did my research on 529 plans and yesterday I spoke with my financial advisor. The first thing I learned was that California doesn’t offer a state income tax deduction for 529 plans so there’s isn’t any advantage to go with our state’s plan. If your state does offer this, then check the fine print. Most states place an annual cap on the amount of the deduction and some impose income limits (so make sure you qualify).

I already knew that an advisor-managed plan would cost us more in ongoing fees and upfront charges. In our case, the upfront (or “front-end”) load is 5 percent. This means that each month with the $400 we invest, $20 immediately goes to fees, which leaves $380 to invest. Obviously, this detracts from our returns over time but the trade off is that she’s actively monitoring the plan’s performance and guiding its allocation of investment options. Hopefully, this means it will perform better than if I managed it. For me personally, I think that’s worth the 5 percent.

We’ve settle on one of the two plans that my advisor recommended: CollegeChoice Advisor.

This plan has ongoing (annual) asset-based fees that range from 0.85 – 2.46 percent (depending on the investments we choose). She said it would average about 1 percent since we’d be selecting many of the ETFs that have lower fees.

It also benefits from the Upromise rewards program, a free service that allows us to save more when we purchases groceries, gas, etc.

So Sam’s college fund will officially begin soon. I’m glad we’re getting started before his first birthday… I’ve been told the next 18 years will go by quickly so best to get the savings plan on autopilot now.

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