How Safe Is Your College Savings Account?
Some families could be hit hard by the 529 savings plans losses in Oregon, Pennsylvania, and Alabama
The federal government has already made some small, temporary improvements, allowing investors to change their portfolios twice this year, instead of the standard once, and adding computers to the list of permissible college-related expenses 529 money can be spent on tax-free. And many state officials are launching reforms to strengthen the safety of their college savings programs.
Oregon's attorney general has sued OppenheimerFunds, alleging the firm misled state overseers about the safety of its portfolio. The AG is asking Oppenheimer to make up for the losses. The state treasurer has also hired a new overseer to check out 529 investments and is preparing to hire a new firm to replace Oppenheimer. Oppenheimer says that it told state officials about the derivatives and that no one could have predicted the collapse of the market.
The director of Alabama's college savings program says the state is about to re-evaluate the fund's investment mix and has stopped accepting new investors. She declined to comment on the lawsuit filed by McLeroy.
Andrea Feirstein, a consultant to 529 plans, says that many other states are boosting the safety of their investments. At least six states, for example, now offer FDIC-insured savings options. Two, Utah and Wisconsin, launched new guaranteed opportunities in the last year.
But, Feirstein added, the losses of the last year should also spur investors to take actions of their own, by, for example, researching the asset allocation of age-based 529 portfolios. "Buyers have to do their homework. Those are the lessons we've learned," she says.
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Reader Comments
Guaranteed Help from the government?
Unfortunately, we can't all work for the government for our entire lives.
Maybe if the govt had service contracts for recent college grads and others where they work for 5 years, gaining some level of pension and then move on to entreprenuership or private employment...
Everyone cannot work for the government for 20,30,40 years with guaranteed pensions...because we do not have the tax base to support this. we have too many seniors and up and coming seniors and not enough younger workers to pay our way in retirement...
The good old days that were passed during FDR worked much like a bell curve...yet law of diminishing returns has hit and although the safety net has worked for many...we cannot sustain the level of retirement hopes and dreams to retire and live it up, and get cream of the crop healthcare for free with medicare...does not add up...
For those of us who missed the free meal ticket that the government offers, we need to get back to the drawing board and work, hard for a living...and save at least 1/3 of what we make.
Alabama Pact
The alabama pact program markets itself THRU state officials
with official state seals and endorsements from senators
and the treasurer.
I started a contract 3 years ago and terminated it about 1 month
ago. It seems to me, we have unethical marketing gimmicks
cooked up by banksters, who pay politicians ( acting as salesmen ) to lure us into this.
So in my opinion all these 401k's, 529 plans are BS
because the only thing these people really are interested in is getting fees and screwing you. They know that when the majority of people need the money they will pass the problem to someone else and let them take the heat.
Besides they can always blame "the market" which is
a code word for crooked bankers and insiders who control them.
Our 529
We put money in our states 529 in their "consevative age based" option. Needless to say we are in the hole with tuition due next month. Had I known this would happen, I would have pi__ed the money away rather than have the financial wh__es loose it for me.
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