It’s always nice to get good news.
CollegeInvest 529 Reduces Feeds for Direct Portfolio
According to a recent release from CollegeInvest CEO Angela Baier, the administrative fee for the CollegeInvest Direct Portfolio was reduced from 0.32% to 0.31% on August 1, 2021. That means more of those college savings dollars stay in your 529 account, and less go to expenses.
Remember, this only applies to the Direct Portfolio at CollegeInvest and not the CollegeInvest Scholars Choice, Smart Choice, or Stable Value Plus plans.
A word about the Direct Portfolio at CollegeInvest
Either the folks who started up CollegeInvest didn’t consult anyone with any knowledge about investing and marketing, or they DID consult someone, and that someone was working for the investment industry more than they were for the people of Colorado. Either way, the resulting Colorado 529 plan system ended up being a bit of a confusing mess for Coloradoans looking to invest money for college.
So, CollegeInvest is the overall umbrella for all Colorado 529 plans. Colorado has four 529 plans. So, to access your 529 account online you go through a CollegeInvest login at collegeinveset.com. Once you get to CollegeInvest online there are FOUR different Colorado 529 plan options. They are not named in a useful way to inform anyone who isn’t already a financial professional or working with a financial professional.
- Direct Portfolio – This poorly named portfolio is the one you use to invest in a 529 plan on your own without the help (or additional fees) of a financial advisor. In other words if you wish to invest “directly” by yourself. A better way to look at it is this is the Vanguard 529 plan, or the Investor Driven 529 plan, or the DIY 529 Plan, or something like that. This is the 529 plan they are talking about when they announced the fee being reduced to 0.31%. Keep in mind this is the overhead administrative fee. Each fund or investment option also has its own fee, or expense ratio.
- Scholars Choice – This portfolio, that somehow got a catchy name (Hmmmm…..) is the Colorado 529 plan sold by financial advisors who receive a commission in exchange for their help in setting up and managing your 529 plan. If you’ve “been meaning” to setup a 529 plan for more than a month or two, it’s worth it to work with a financial planner or advisor to get going rather than “getting around to it” later. — You can’t get Vanguard funds in this plan because Vanguard doesn’t pay commissions to brokers. Instead, you can choose from 14 different fund portfolios, plus age-based options. – This option has a 0.15% fee that goes to Nuveen/TIAA for managing the plan, an additional 0.10% fee (currently 0.06% due to a voluntary waiver) that goes to CollegeInvest. There is also a 0.25% Distribution and Service fee for a total of 0.46% (0.50% without the voluntary waiver) plus whatever the investment expenses are. Then, there is also either a Class A charge of up to 3.5% up front, or a Class C charge of 0.75% per year that goes (mostly) to pay your financial advisor. – You can only buy this plan through a financial professional, so make sure they explain it to you until you understand it.
- Smart Choice – The Smart Choice 529 plan (Hey, another decent marketing name. I should look into who set this all up. It’s almost criminal.) is the “just stick it in the bank” portfolio. For all but the oldest of children this is likely a mistake, but if you cannot handle investment risk, this is for you. Basically, First Bank puts your 529 plan contributions in a savings account. You get to choose a money market account, or a 1-year time account (basically a one year CD).
- Stable Value Plus – This one offers a fixed-income that is a bit better than the Smart Choice plan, although it technically isn’t FDIC-insured. This plan is run by Nationwide and currently offers 2.09% as the fixed rate. The guaranteed rate is reset each December 1 and is paid through December 31 of the following year when the new rate, published on December 1st, goes into effect. — CollegeInvest charges 0.71% management fee on this plan. However, it’s kind of baked in. The 2.09% is what the 529 investor earns on the Colorado Stable Value Plus 529 plan net of all fees.
You may need IRS Form 709 if you are contributing to a 529 plan via the gift tax for estate planning purposes.