Fees Have Been Cut in Half, Plus More Plan Options Have Become Available
By Rachel M. Anderson
(Twin Cities, Aug. 12, 2014) – When it comes to investing your money, you of course want to get the best rate of return possible. To help improve the odds, a lot of people hire money managers, but do you know how much they are costing you?
The average investment firm charges between two and five-percent to manage your account. On a $50,000 investment, that amounts to between $1,000 and $2,500 in fees. “That’s way too much money to spend when you are saving for college. There is a better option,” points out Robert Stern, program manager for the Minnesota College Savings Plan, the state’s designated 529 plan.
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. Minnesota’s plan has been around since 2001 and currently has more than 33,000 account holders.
Effective Aug. 12, every one of them will receive some good news. An agreement has been signed that lowers their fees from one-half-of-one-percent to between one-fifth and one-third of a percent.
This means the fees on that same $50,000 investment that cost between $1,000 and $2,500 in a traditional brokerage account will cost Minnesota College Savings Plan holders between $95 and $165.
That is music to the ears of parents like Ben Thul who lives in St. Francis, Minn. He and his wife have two children, a 5-year-old daughter and a 3-year-old son. They have been saving money for college for the past two years.
“We have a set amount of money that comes out of our paychecks and goes right into the college savings account every month so we don’t even miss it,” he said. “Now with the lower fees, we’ll have even more money going towards what we are saving for which is awesome.”
Dana Anderson of Scandia, Minn., has been saving money in the plan monthly since her daughter, who is now 11-years-old was born. She too is happy to hear about the changes. “I think it’s wonderful that the fees are being lowered. Any help parents can get when it comes to saving for college is terrific.”
In addition to the lowered fees, other changes that went into effect on Aug. 12, 2014, include a change in the investment lineup. Account holders now have access to eleven funds, including four new funds: a conservative fund, an aggressive fund, a large cap fund and an equity plus interest fund. There will also be a change to the managed allocation fund, which manages an account’s stock market exposure over time based on
the child’s age. There will now be nine age-bands instead of six. In addition, the contribution limit for each account is being raised from $235,000 to $350,000.
“With all these changes we now have a plan all Minnesotans should be proud of. I hope as many people as possible will take advantage of it,” said Michael Noone, President of TIAA-CREF Tuition Financing, Inc.
Families can open an account with as little as $25. For employers offering payroll deduction, the minimum contribution is just $15. Plus, there are no additional sales charges, start-up or maintenance fees. All earnings in the plan’s investments grow tax- free as long as the funds are used for qualified expenses at any college, university, trade or career school in the nation and some foreign countries.
To learn more about the Minnesota College Savings Plan, visit www.mnsaves.org or call (877) 338-4646 to speak to a consultant. The Minnesota College Savings Plan is managed by TIAA- CREF Tuition Financing, Inc. (TFI). This past March, Lipper designated TIAA-CREF as the Best Overall Large Fund Group, highlighting the firm’s commitment to offering best-in-class mutual fund products across asset classes. TFI is part of the TIAA-CREF group of companies, with over $613 billion in combined assets under management as of 6/30/2014.
Consider the investment objectives, risks, charges and expenses before investing in the Minnesota College Savings Plan. Please visit www.mnsaves.org for a Plan Disclosure Booklet with this and other information. Read it carefully. Investments in the Plan are neither insured nor guaranteed and there is the risk of investment loss. Before investing in a 529 plan, consider whether the state where you or your designated Beneficiary resides has a 529 plan offering favorable state tax benefits available if you invest in that state's 529 plan.
The tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding federal or state taxes or tax penalties. Taxpayers should seek tax advice from an independent tax advisor based on their own particular circumstances. Non-qualified withdrawals may be subject to federal and state taxes and the additional federal 10% tax. TIAA-CREF Tuition Financing Inc., Plan Manager
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