529 plans — Bright Start?
I read your 2013 piece not recommending Bright Start. Do you still agree with this? I am looking at Utah’s plan vs. the direct-sold Bright Start. (I don’t like Bright Directions because of their higher fees.) I’m not sure which one to sign up for since I read the Bright Start index portfolios were not affected in the 2008 fiasco. I wanted to have the advantage of the IL plan for the tax deduction, but it may not be worth it if Utah has such low fees and good performance.
Thank you very much.
Terry Says: Yes, that’s a tough decision and I admit I am biased against Illinois — and remain that way — because of their egregious response to the fiasco of 2008, when a portfolio manager in what was supposed to be the most secure investment (closest to college age) lost a large percentage. The portfolio manager was allowed to “leave”, and the state of Illinois managed to get a partial settlement (along with several other state plans) of about 85 cents on the dollar returned to the fund, but the state did not dismiss the fund management company! The delays and losses truly messed up the financial plans of many families who were counting on that to pay tuition in the coming year.
I don’t want to speculate on why they were allowed to continue managing funds for Illinois, but I vowed to never recommend the Illinois Bright Start plan again. I don’t think the tax deduction is worth that much, and as you pointed out you can get similar or better performance in other plans, and even with lower fees. To research plans go to either Morningstar.com or www.SavingforCollege.com, which give you the details of each state’s funds.