17 Best 529 College Savings Plans: Morningstar
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A 529 college savings plan appeals to many Americans who want to put away money for their children’s education expenses, as investments in these vehicles grow tax free.
In an annual exercise, Morningstar manager research analysts rate most of the 529 plan universe based on their assessment of each plan’s investment merits compared with those of their peers. This year, they reviewed 54 plans, representing $415 billion in assets as of August.
The 2023 ratings showed that standards across the industry have continued to rise since Morningstar began rating 529 plans in 2012. More and more plans have adopted some or more of the positive attributes in Morningstar’s rating methodology.
Asset managers no longer treat education savings plans like an afterthought to their existing multi-asset offerings, manager research analyst Hyunmin Kim wrote in a recent blog post. Instead, they increasingly dedicate research and resources to specifically helping education savers.
Stewardship standards are also rising, Kim noted. Robust interaction between the state and its investment entity forms a baseline now, with more engaged state entities aggressively negotiating with external managers and advocating for their account holders.
Thirty-four of the 54 plans in Morningstar’s 2023 assessment earned Gold, Silver or Bronze medalist ratings. According to Kim, they exhibited some combination of the following attractive features:
A well-researched approach to asset allocation
A robust process for selecting and monitoring underlying investments
An experienced and well-resourced investment team
Stable and engaged oversight from the state
Low fees
“Investors in what Morningstar analysts consider the best 529 plans should be well-positioned for the future,” Kim wrote.
She also noted that many states provide income tax benefits to education savers.
“And depending on a saver’s place of residency and unique tax profile (which we do not factor into our ratings), those benefits might be generous enough to make investing in their home state’s plan a worthy choice even if it’s not one we recommend,” Kim wrote.
See the accompanying gallery for the 17 529 plans to which Morningstar manager analysts awarded Gold or Silver ratings this year.
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