Jason Stipp: I am Jason Stipp, site editor for Morningstar.com.
In conjunction with Morningstar's Fund Research and Data teams, Morningstar.com recently launched a new series of 529 plan data, research, and ratings to help you pick a better 529 plan to meet your college savings needs.
529 plans are an important tool for college savers because they allow you to save tax-free for college education, provided that the withdrawals are used for qualified university expenses. They are a very important tool for you to consider as you're planning how to finance the increasing cost of a college education.
U.S. states sponsor 529 plans, but they are administered by mutual fund companies. Most plans offer several options, and they are composed of underlying mutual funds.
Let's take a tour of the new pages.
To access our new 529 data, click the "Real Life Finance" tab and "Save for College." 529 data will always be featured at the top of this page.
Most states offer a tax break for investors who invest in their own state's plan. So, this map page is a great way to start to access data and analysis on the plans offered in your state.
However, you are not obligated to invest in your own state's plan, and if your state doesn't have an income tax or if a tax break isn't offered, it may pay for you to shop around and go out of state to find the best-of-breed plan. Morningstar can offer you tips on when it pays to look around and shop around.
To get started, click your state. The next page will show you the plans offered in your state, as well as whether you can receive an in-state tax deduction on your contributions. Morningstar.com Premium Members can also see the analyst-designated plan rating for those plans that we cover.
To learn more about a plan, click the plan name. The 529 Plan Overview page offers you high-level information about the plan at a glance. Again, Premium Members can see the plan rating and access the analyst written report for those plans that are under coverage.
Premium Members can consult the plan Analysis tab to see a Morningstar analyst's written take on the plan's fees, the plan's options, its performance history, and underlying fund investments. Based on their qualitative analysis, Morningstar researchers will also assign the plan a rating of bottom, below average, average, above average, or top.
Back on the Plan Overview page, you can also see a visual Glide Path for the plan's age-based options. An age-based 529 Plan option will automatically shift from more stock to more fixed-income exposure as the child nears enrollment age. Morningstar's 529 Glide Path shows you how the equity exposure of the plan's age-based options will decline over childhood.
Many plans offer more than one age-based track, and on the Plan Overview page, you can see each track's individual Glide Path, as well as the industry average.
Plans that hold more equity will tend to be higher risk, but also potentially higher reward. For any age-based option, you should make sure that you are comfortable with the percentage of the equity that's held at that age, especially near enrollment, as this is when plan withdrawals are imminent.
Investors can also see a list of all the plan options, and fee, purchase, and contact information on this page.
The Options Overview page presents all of the plans' choices along with their star ratings, the percentage that they have in stocks, and return data.
Morningstar has created a 529 categorization for age-based and static 529 plan options, so you can more easily compare one plan's option to another. In addition, the categorization system allows Morningstar to apply its star rating methodology to assess how well a plan option has balanced its risk and its return in the past compared with its category peers.
Clicking on an individual plan option allows you to dig even deeper and see option-specific fees, return and risk versus its category, its asset allocation, performance, and trailing returns. In addition, you can see the specific glide path that's related to that option, if applicable.
You can also see the underlying mutual fund holdings within that option and click through for more information on any of those funds.
To search the 529 universe more broadly, you can use Morningstar's new 529 Plan Finder. You can access the Finder from the 529 Plan Map page or from our College Saving Center cover page.
The 529 Plan Finder lets you filter through all the available plan options out there. You can mouse over the column headers to narrow the search by state, option star rating and Premium Plan rating if you are a Premium Member.
You can also add screen criteria to return only direct- or advisor-sold plans, and you can check availability on out-of-state plans.
There are a lot of investment options and tax decisions when you're investing in 529 plans, and it can seem overwhelming at first. But we hope that our new data, research, and tools can make this very important investment decision a little bit simpler.
For Morningstar.com, I'm Jason Stipp. Thanks for watching.