what is the ROI on your 529 accounts so far?

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shainy
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what is the ROI on your 529 accounts so far?

Post by shainy »

Dear Boglers,

I made up my mind to enroll my kids in Utah 529 plan. But little curious to know the rate of return on your 529(not only Utah , but any 529) account since it was opened.
Please share it if you do not mind.

Thanks,
Shainy
wwross
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Re: what is the ROI on your 529 accounts so far?

Post by wwross »

Thats a good question. I frankly don't know what my ROI is. I guess I should.

I only know that with my 529 I violated a cardinal rule of personal finance and investing: once you reach your goal and have won the game, stop playing. We have three boys and at one point in early 2008 had about $320k in our Virginia 529, based on a moderately aggressive allocation. My kids have gone to Va. state schools, so this was plenty (with some left over for graduate school). However, I didn't pay attention to this and with all the market tumult at the time and dealing with other retirement and brokerage investments, didn't back off of the heavier stock allocations. The accounts fell back to about $230k within the year. Fortunately, they worked their way back up to about $270k before I switched to a series of safe allocations as we were approaching college matriculation age.
Xanadu
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Re: what is the ROI on your 529 accounts so far?

Post by Xanadu »

shainy wrote:Dear Boglers,

I made up my mind to enroll my kids in Utah 529 plan. But little curious to know the rate of return on your 529(not only Utah , but any 529) account since it was opened.
Please share it if you do not mind.

Thanks,
Shainy
I think that will rely entirely on how the funds are invested. A 529 invested entirely in a stock fund would have a very different ROI than one that is 100% money market or bond fund.

I'm planning on starting a 529 plan at the end of this year. Since it will be another 18 years before I have to withdraw anything from it, I plan to just treat the 529 plan as part of my overall asset allocation. Since I don't have a lot of space currently for International stocks, I'm going to use the entire 529 space for International.
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serbeer
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Re: what is the ROI on your 529 accounts so far?

Post by serbeer »

In my IL Bright Start accounts invested into 90/10 stocks/bonds index funds:
for 1st kid (started in 2009) it is 10.85% overall and 13.89% YTD
for 2nd kid (started in 2010) it is 14.07% overall and 13.82% YTD

Not sure how it helps you, but since you asked...
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shainy
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Re: what is the ROI on your 529 accounts so far?

Post by shainy »

serbeer wrote:In my IL Bright Start accounts invested into 90/10 stocks/bonds index funds:
for 1st kid (started in 2009) it is 10.85% overall and 13.89% YTD
for 2nd kid (started in 2010) it is 14.07% overall and 13.82% YTD

Not sure how it helps you, but since you asked...

It make me feel better to see the decent returns.

The reason i asked the above question was, couple of my friends who went with traditional 529(do not know the exact 529 plan they went with) are feeling sorry now that there are absolutely no return on their investments and thinking that prepaid plan would have been a better choice , they at least can have peace of mind with prepaid plan.

Hence i wanted to know to the ROI on 529 accounts to see if they have the same experience as my friends.

Thanks to all of you who have replied to this thread.

--Shainy
HoneyBee
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Re: what is the ROI on your 529 accounts so far?

Post by HoneyBee »

It all depends on when you made the investment and which investment option you choose.

I have the Utah 529 for my college freshman son. I just happened to check the account this evening. The basis is $40,000 and the fund is now about $56,000. We used the Age Based Moderate option.

The one thing I find annoying is being charged about $9.00 per month as an administrative fee, although I understand the Utah 529 fees are lower than some other 529 plans.
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mhc
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Re: what is the ROI on your 529 accounts so far?

Post by mhc »

I have mine in the Nevada plan at Vanguard. It's in TSM and Small Cap Index. The return is whatever those funds have been returning minus the expenses.
Dadarkar
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Re: what is the ROI on your 529 accounts so far?

Post by Dadarkar »

New York's 529 plan Conservative Age-Based Option
Invested since 2003.
Investment returns 4.8% 1 year, 5.7% 3 years and 3.65% for past 5 years.These numbers may not seem high, but
in 2008-09, I was pretty happy with my conservative option.
This is addition to savings on NY State Deduction on $10 k per year and cash rewards from upromise reward card.
dickenjb
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Re: what is the ROI on your 529 accounts so far?

Post by dickenjb »

Opened two accounts in 2006. Contributed the max each year ($12K to start then $13K). Total of $75K invested, balances are $91K. Aggressive age based portfolio. For many years they were underwater. Guess I earned an IRR of around 6%. I'm too lazy to calculate the exact IRR as it would not drive any decisions.

Got 3.07% of my contribution back each year as a reduction in PA tax. Since I have always been in AMT zone, I get to keep all of that.
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Re: what is the ROI on your 529 accounts so far?

Post by livesoft »

We have received the returns of the stock market and the bond market in the 529 plans we have used.

For instance, we opened Utah 529 plans in 2004 and sold at a loss in 2009 in order to claim the tax deduction. That is, the 4.5 year return was negative. :)
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shainy
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Re: what is the ROI on your 529 accounts so far?

Post by shainy »

Thank you all for taking time to respond to my question.

With the little or negative return on 529 accounts, don't you think that prepaid plans are better than traditional 529 account?
With Prepaid plan, it is guaranteed that kid's tuition is paid off if they go to public universities within the state.
What if the balance in the 529 account is not grown to beat the inflation/rising college tuition cost?


do you have any back up to cover college tuition in addition to 529 accounts?

Sorry to bug you with lot of questions...Please help this poor soul.

Thank you all,
Shainy
dickenjb
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Re: what is the ROI on your 529 accounts so far?

Post by dickenjb »

shainy wrote:Thank you all for taking time to respond to my question.

With the little or negative return on 529 accounts, don't you think that prepaid plans are better than traditional 529 account?

Shainy
.

Prepaid plans were better from 2004 to 2009.

As to the future - my crystal ball is rather cloudy at the moment
livesoft
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Re: what is the ROI on your 529 accounts so far?

Post by livesoft »

shainy wrote:do you have any back up to cover college tuition in addition to 529 accounts?
Folks paid for college before 529 plans were invented. Indeed, we pay for college the old-fashioned way: We just take it out of our paychecks and send it in. Kid in college also works.
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Grt2bOutdoors
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Re: what is the ROI on your 529 accounts so far?

Post by Grt2bOutdoors »

Opened Utah 529 moderate plan and Ohio 529 FDIC insured CD's (5% interest rate) plan in mid 2010, total return thus far - 11.9%. Haven't calculated the ytd return - it's at least high single digits.

Backup plan - taxable investments, e-fund, earnings cashflow, financial aid if necessary, ROTH as last resort.

As for college tuition rate of escalation - do trees grow to the sky? do you see pink elephants flying? What goes up, must come down or so they say. It's not sustainable, either people wise up and buy what they can afford or they don't. Those who don't only need read the current events to see what awaits them at the end of the tunnel. I have friends of mine whose kids started school 4 years ago, the advice I gave then is the same I give today - get the biggest bang for your buck, if you have any aspirations of graduate school right after undergrad, save your money for that. Did they listen?, no - now they call me and say you know, you were right. Would you invest your money if you knew the rate of return on the investment was negative? The minute you take a loan out to pay for school, the clock starts ticking, after 6 months you are expected to start repayment - if you don't have employment, what is the rate of return? And yet, we read stories all the time of kids coming out with $50, $100 or $200K in student debt with no job. Heck, I see them outside my window everyday, the OWS crowd. :oops:
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Re: what is the ROI on your 529 accounts so far?

Post by Grt2bOutdoors »

dickenjb wrote:
shainy wrote:Thank you all for taking time to respond to my question.

With the little or negative return on 529 accounts, don't you think that prepaid plans are better than traditional 529 account?

Shainy
.

Prepaid plans were better from 2004 to 2009.

As to the future - my crystal ball is rather cloudy at the moment
Yesterday, someone posted a thread inquiring about the Illinois Prepaid plan - the overwhelming response was not to do it. The reasons - the state was bankrupt, there is no state guarantee, two of the last three governors have been convicted and sent to prison, the plan was underfunded and it was questionable if the money you would put in today, would be there for you tomorrow.

I agree with dickensjb - prepaid plans are not the way to go.
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cmanion
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Re: what is the ROI on your 529 accounts so far?

Post by cmanion »

We're in the Iowa 529 with Vanguard. Haven't had it a year yet so I can't view my return. However, i'm up $500 from when we started. I took this screen shot of historical returns for you.

Image
letsgobobby
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Re: what is the ROI on your 529 accounts so far?

Post by letsgobobby »

Indeed there were some steals in prepaid tuition plans in years past. Here's a Fatwallet thread in which I urged another poster to buy the WA GET prepaid units, way back in 2007:

http://www.fatwallet.com/forums/finance/302009/?start=0

Unfortunately, he did not bite. Units which cost $70 in 2007 and $76 in 2009 now cost $172 and are redeemable at $117 each. For 2007 that is a 67% return in 5.5 years, whereas for 2009 that is a 54% return in 3.5 years. Most importantly, they do not have equity like risks.

But those deals do not generally exist today, there is usually a catch. In IL the catch is that the plan is not guaranteed by the full faith and credit of the state. In MA the catch is that the plan can't be used at full value out of state, or at Harvard. In WA the catch is that the premium over current tuition is now very very high ($172-$117).

In our Utah 529 plans, which have always been 100% stock (30% TSM, 30% small cap index, 30% developed markets index, 10% international value), the one opened on March 12, 2008 has net contributions of $50,000 and a total value of $62,000. For the one opened January 12, 2010, it has net contributions of $30,000 and a total value of $34,000.

Since 3/12/08: 8.97% XIRR
Since 1/12/10: 10.42% XIRR

In both cases my contributions got a bit unlucky with their timing. Nevertheless I'm actually kind of surprised by these results - they did not seem so good to me, before I did the calculation.
Last edited by letsgobobby on Fri Oct 05, 2012 10:51 pm, edited 1 time in total.
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Re: what is the ROI on your 529 accounts so far?

Post by 2beachcombers »

Have 3 Fido 529s, started in 2006, 2008, 2009. Age based 6,7,10. Avg is 7-8% rtn

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Re: what is the ROI on your 529 accounts so far?

Post by dhodson »

I feel focusing on ROI as a value isnt that helpful.

I feel its more helpful to make sure you have a low cost provider and recieve appropriate state tax breaks when possible as long as it doesnt conflict too much with a low cost provider. Otherwise it leads to market timing/yield chasing/stock picking etc in order to try and do better. The main problem with 529 plans is that the time period you are investing over is less than what you might be investing over in order to retire and thus you are more succeptible to timing.
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pfrank
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Re: what is the ROI on your 529 accounts so far?

Post by pfrank »

letsgobobby wrote:In MA the catch is that the plan can't be used at full value out of state, or at Harvard.
The MA pre-paid tuition plan only covers 80 in-state public and private universities and colleges. Yes, it does not cover Harvard and you cannot use the program money out of state. However, it is a no-risk program for both residents and non-residents. Unlike most plans, is backed by the full faith of the Commonwealth. You purchase tuition and mandatory fees with today's dollars. So if tuition and fees are $10,000 today and I pay $1,000, it is guaranteed that 10% of my child's tuition is paid when he/she goes to college in 2027, regardless of what the tuition cost is in 2027. You can take the tuition early or delay it if need be with no penalty.

If your child doesn't go to college,doesn't go to one of the colleges in the program, or use up all of the money, then you get your money back PLUS interest based upon the CPI...it is all tax free if you are a Massachusetts resident (federal tax free if you are a non-resident). So if you need your money back, it acts like an I-Bond.
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Re: what is the ROI on your 529 accounts so far?

Post by Sunny Sarkar »

shainy wrote:little curious to know the rate of return on your 529(not only Utah , but any 529) account since it was opened.
Here's what my "Personal performance" page says for our 9 year old (and old's) Vanguard/Nevada 529 account:
  • 5-year : 1.6%
    3-year: 10.4%
    1-year: 25.2%
Could not find the full 9-years' returns, but I guess it will be near par. It may look like a "lost decade", but it's really pretty good since it's beneficial for stock prices to stay low during the "accumulation phase".
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Re: what is the ROI on your 529 accounts so far?

Post by White Coat Investor »

I've been using the Vanguard ESA and now the Utah 529 all in Vanguard funds since 2007 for two kids and since 2009 for a third. They are invested aggressively in 90-100% stocks. Annualized after-tax, after-expense returns are 5.20%, 5.05%, and 12.85%. Guess which two suffered through the 2008 downturn?
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mrspremise
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Re: what is the ROI on your 529 accounts so far?

Post by mrspremise »

shainy wrote: With the little or negative return on 529 accounts, don't you think that prepaid plans are better than traditional 529 account?
With Prepaid plan, it is guaranteed that kid's tuition is paid off if they go to public universities within the state.
What if the balance in the 529 account is not grown to beat the inflation/rising college tuition cost?
Not all states have prepaid plans, and not all prepaid plans are equal. I'm in Texas, and their current plan (which is not backed by the state) isn't completely stupid in its implementation like the previous one (which was a great deal and therefore insolvent). Basically you buy tuition credits at today's prices (whatever it is when you buy the credit, you don't lock in a rate) and they invest it for you. If you go to a state college, the college must accept those tuition credits. If the investment didn't do well enough to cover the expenses, the college is out the difference. If the account does better they get 101% of the tuition for the kid. There's also some stuff with which type of credit you buy, but I won't go into it. If you don't go to a state school, you get what the underlying investment did minus some fees/penalties. Here's why I decided to go with a 529:

1) My son is 1 year old- I have no idea if he will go to a TX state school. I could say "well, but at least I'll get the money from my investment" but in this plan I have no control over how the money is invested or what kind of expenses are charged on the account. Chances are it won't do as well as a Vanguard index fund account at that point. This is my main reason for doing a 529.

2) 529 plans have a lot of provisions to mitigate some of the unknowns, like being able to transfer the money to a relative for their education or pull out money penalty (but not tax) free if a child receives a scholarship. There are some provisions in the Texas prepaid plan, but they're more restrictive (relative must be a TX resident, for example) 529's also cover eligible expenses besides tuition like fees, books, housing, etc. Even if I had done a prepaid tuition plan, I'd probably want some money in a 529 plan.

3) I can transfer money from a 529 plan to my tuition promise fund later if I'd like. Yes, tuition will probably be more at that point, but I'd also at that point hopefully have better clarity as to what the probable college options are then, and I've still benefited from tax-free growth, assuming the market grows.

4) You're just betting on something different with the prepaid tuition. You're betting that tuition will rise faster than your investments will grow (which historically would be a good bet) OR you're hedging against a big drop in your investments close to when your kids go to college. Both are reasonable bets, but they're bets just like guessing that tuition will decrease/get put under control by the free market or the government or that a plan won't remain solvent (which as a general rule become more of a risk the better "deal" you get). All things being equal, I decided I'd rather treat my money like a normal investment for now and see which way the wind blows.

We chose the UESP agressive age based in May, and we're up 3.6%.
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tdirgins
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Re: what is the ROI on your 529 accounts so far?

Post by tdirgins »

NY 529 Plan. All figures IRR. Both accounts opened in 2003.

Kid 1 (13) until this year was 100% Growth Stock Index Portfolio. Dialing it back a little each year from now to HS graduation.

75% Growth Stock Index Portfolio
25% Bond Market Index Portfolio

1yr 30.98%
3yr 15.60%
5 yr 10.33%

Kid 2 (10)
100% Growth Stock Index Portfolio. Same strategy as above.
1yr 32.37%
3yr 16.13%
5 yr 10.18%
letsgobobby
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Re: what is the ROI on your 529 accounts so far?

Post by letsgobobby »

pfrank wrote:
letsgobobby wrote:In MA the catch is that the plan can't be used at full value out of state, or at Harvard.
The MA pre-paid tuition plan only covers 80 in-state public and private universities and colleges. Yes, it does not cover Harvard and you cannot use the program money out of state. However, it is a no-risk program for both residents and non-residents. Unlike most plans, is backed by the full faith of the Commonwealth. You purchase tuition and mandatory fees with today's dollars. So if tuition and fees are $10,000 today and I pay $1,000, it is guaranteed that 10% of my child's tuition is paid when he/she goes to college in 2027, regardless of what the tuition cost is in 2027. You can take the tuition early or delay it if need be with no penalty.

If your child doesn't go to college,doesn't go to one of the colleges in the program, or use up all of the money, then you get your money back PLUS interest based upon the CPI...it is all tax free if you are a Massachusetts resident (federal tax free if you are a non-resident). So if you need your money back, it acts like an I-Bond.
pfrank,

Yes, I am aware of all this and I think it was you who first brought the MA plan to my attention. Note that having I-bond returns (0% real) for potentially hundreds of thousands of dollars over 18-22 year time periods is, while low-risk, fraught with opportunity cost. In that sense the MA plan is much riskier than the WA plan, which retains its full value even if withdrawn and not used for qualified educational expenses, or if used out of state.
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Re: what is the ROI on your 529 accounts so far?

Post by Majormajor78 »

IL Brightstart Vanguard age-based 0-6 years (90% stock/10% bonds)

kid #1 has a ROI of 22.18% (opened in fall of '07)
Kid #2 has a ROI of 12.67% (opened in spring of '10)
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asset_chaos
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Re: what is the ROI on your 529 accounts so far?

Post by asset_chaos »

The return over the relatively short investment time frame of a 529 will be highly time dependent. Personal example as of the end of 3Q 2012. The account for the child born in 2004 has had around a 4% annual geometric return. The account for the child born in 2008 has had around a 12% annual geometric return. And I'm not nearly smart or persuasive enough to have timed both the financial markets and the child bearing "market" that my wife controls.-)
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OnFire
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Re: what is the ROI on your 529 accounts so far?

Post by OnFire »

IL Bright Start Account for 2 year old opened in 2010 - 18.6%, Account for 1 Year Old, opened in 2011 - 6.8%

If the original Pre-paid plan was still in effect, I would go for it, but it's insolvent and the other posters noted, IL has the worst pension problems, the most feloy-convicted politicians, and no guarantees. I'll stick with 529's and Roths, plus current income and hopefully scholarships.
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Re: what is the ROI on your 529 accounts so far?

Post by joebruin77 »

I opened a Utah 529 plan account for each of my daughters shortly after they were born. My oldest was born in late 2004 and my second in early 2007. I dollar cost average a monthly contribution, but the amount has varied. My oldest has a ROI of 22.4% and my youngest has a ROI of 27.7%. They are both invested in the Moderate age-based option.

Overall, I have been very pleased with the Utah 529 plan and I highly recommend it.
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