<p>I was wondering if anyone is aware of a 529 plan where there is little risk to the principle balance. I recognize the returns will not be favorable but I want the tax advantage associated with these programs. Any help would be appreciated. Daughter has three years left in HS so there is no time to recoup any losses if we have a repeat performance of the recent market crash.</p>
<p>Thx in advance.</p>
<p>TRowePrice has a variety of 529 plans. They are for State of Alaska, but are open to investment to people from any state. There are conservative choices, and also ones indexed to the year you will need the money. However, if you invest conservatively (as you probably should with a 3 year timeframe) then tax savings become less of an issue since you won’t have large gains. So, be careful to investigate the service fees in what aver plan you choose.</p>
<p>If you want the tax advantage then you must use the 529 for your resident state. </p>
<p>example, Oregon gives 9% tax credit for residents but nothing for out-of-staters. The second year of the deposit, there is no credit. The advantage of this credit over two tax years is 9/2=4.5%; 3 years, 9/3=3%; 5 years, 9/5=1.8%. Plus any interest that accrues. Assuming you invest in the MM/guaranteed fund.</p>
<p>Oregon 529 will take your money and you will only get the interest. Assuming you invest in the MM/guaranteed fund.</p>
<p>OP - LongPrime is correct, usually you have to invest through your own states 529 Plan in qualify for the tax credit. There is no Federal Tax Credit that I have ever heard of. And your state’s 529 Plan probably has something like a MM/guaranteed fund with no risk and virtually no growth.</p>
<p>Ohio has a CD option in its 529 plan. You choose the number of months until maturity. You can split it up into several accounts and set a different maturity date for each one.</p>
<p>I also like the Vanguard Income Portfolio at Ohio, but it’s not risk free.</p>
<p>Thx everyone. Unfortunately CA is where we call home so there is no state tax credit associated with our plan, not sure I’d trust the money here anyways 
I’ll look at the plans suggested. I did see an attached article in another thread that spoke of a Michigan plan with a fixed rate of return, low fees and secure principle. Anything beats current CD or savings account rates right now and again I have zero tolerance for risk presently.</p>
<p>a 3 year CD would outside of a 529 would do you better.</p>
<p>I know how you feel. We got hit with the dot.com/tech crash and then again on 9/11’s aftermath. DS started college in 2002. He lost so much in his UGMA that we didn’t have much choice but to take loans. The EE’s save his college funding until things got better in the latter half of 2005.</p>
<p>You will get a low rate of return if you have zero tolerance for risk. That is just how our economic system works.</p>
<p>Since you will have a low rate of return, taxes should be a minimal or nonexistant consideration. Taxes are much more important when you have a high rate of return or invest for a long period of time.</p>
<p>We have the New Hampshire 529 plan managed by Fidelity, even though we are from another state. I don’t like the way my in-state fund is managed. The plan is subject to my state taxes, but not federal tax. I just filed my kid’s tax returns and the state taxes were pretty minimal. Any financial advisor will tell you that 529 plans are the best way to save for college because they are federal tax free - a rare beast. </p>
<p>The Fidelity plans are scaled so that in the last few years of high school the portfolio is very conservative. My high school senior is in the 2009 plan and my sophomore is in the 2012 plan. Their growth has been slower than my fifth grader who has the 2018 plan.</p>
<p>Here’s the link to the New Hampshire plan:</p>
<p>[Fidelity</a> Investments](<a href=“http://personal.fidelity.com/planning/college/content/landing_nh.shtml.cvsr]Fidelity”>Unique College Investing Plan | New Hampshire | Fidelity)</p>
<p>OP, before you decide to do this, you should be familiar with how the tax deductions and credits for higher ed expenses work. Given the lack of state tax advantage, low interest, short time period, and IRS rules against “double dipping”, the 529 may not provide you with an advantage. I suggest reviewing IRS Publication 970, which is accessible on irs.gov, and also (for a somewhat clearer explanation) use the finaid.org site which has a wealth of info on all things related to college finances:</p>
<p>[FinAid</a> | Saving for College | Education Tax Benefit Coordination](<a href=“Your Guide for College Financial Aid - Finaid”>Your Guide for College Financial Aid - Finaid)</p>
<p>Vanguard has a portfolio that is basically a money market.</p>
<p>If your D is likely to go to a private college, the Independent 529 Plan (run by TIAA/CREF) is low risk - you are guaranteed to get returns that keep up with the tuition increase rate.</p>
<p>[Independent</a> 529 Plan](<a href=“http://www.independent529plan.org%5DIndependent”>http://www.independent529plan.org)</p>
<p>The biggest risk is what happens if your D doesn’t go to one of the affiliated colleges. In that case, you can get your money back, with the returns limited to +/- 2% gain/loss per year.</p>
<p>We are in Utah’s plan. Over the years they’ve added many investment options and one is FDIC insured savings.</p>
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<p>I agree with sk8rmom. You can’t get the American Opportunity Credit (up to $2,500) based on money that comes out of a 529 plan. There’s no way you’d make that much money on your 529! You wouldn’t earn very much with a risk-free account outside of a 529, so taxes would be minimal.</p>
<p>The 3 year US Treasury rate is 1.64%. Given the fees that many 529 plans and the related funds pay, if you truly want a risk free return, I would suggest you NOT put the money in one of these plans. I am an investment professional and I could never got over the small print and restrictions of the plans, so I never opened one for either kid, instead I kept the money in our own Fidelity account and prudently managed it based on their ages and my market perceptions.</p>