College-savings plan receives high marks

Home

Related Photos

Discussion

July 31, 2007

Anonymous The Joplin Globe Tue Jul 31, 2007, 11:13 PM CDT

By Joe Hadsall

jhadsall@joplinglobe.com

Four-year-old Ashlyn Kanakis wants to be a “pet store lady” when she grows up.

“She loves dogs and cats,” said her mother, Mandy Kanakis. “We’re hoping it turns into wanting to be a veterinarian, though.”

Like many parents, Mandy and her husband, Robert, of Joplin, have dreams for their family. They also worry about the cost of higher education.

The Kanakis family already has begun saving for Ashlyn’s college education. Ashlyn’s grandmother, Dee Kanakis, is making contributions into a MOST account, Missouri’s 529 college savings plan.

“We have been making annual contributions at Christmas,” Dee Kanakis said. “It’s a gift to help secure her educational future.”

“It’s a big comfort to me,” Mandy Kanakis said. “Wherever she wants to go, we’ll be in good shape. She’ll be set.”

Mandy Kanakis also is a “MOST Mom,” one of a group of volunteers across Missouri who make appearances at community events and share news about the program.

In the past, questions have lingered over the best way to save for college, such as Coverdell Education Savings Accounts, 529s or using the Uniform Gift to Minors Act.

Money magazine in its August issue said the best way to save is a 529 plan — named for Section 529 of the Internal Revenue Code — and that Missouri offers one of the best.

Considering tax benefits and the cost of the plans, the magazine concluded: “You’d now be a fool to save any other way but in a 529 plan.”

Missouri Treasurer Sarah Steelman hopes that message gets more people into a 529.

“My goal is for every child in Missouri to have the opportunity to go to college,” Steelman said Tuesday. “MOST offers a chance for parents at every income level to put money away for their children’s education.”

Missouri’s MOST — Missouri Savings for Tuition — plan was selected by Money magazine as one of 27 elite 529 plans. The magazine gave the plan high marks for offering a deduction on state income tax, and for direct availability to consumers without a broker. With as little as $25, a parent can open a MOST account and invest it in a mutual fund. Up to $8,000 — per parent — can be deducted from state income taxes.

Dee Kanakis said she chose the MOST plan for its state tax benefits.

“For Missouri taxpayers, it’s a nice tax deduction,” she said. “It’s a way to do something for our granddaughter and have a tax benefit on our end.”

Russ Alcorn, a financial adviser for Edward Jones, agrees with Money’s assessment. He has directed several of his clients to the MOST program.

“If parents want the money to be used for a college education, then a 529 is the best,” Alcorn said. “All of them have tax-deferred growth ... but Missouri’s program can get taxpayers that extra deduction.”

The high rankings come after the Missouri program was revamped last year to offer more choices and better-performing funds. The program is managed by Upromise Investments, which is affiliated with Vanguard and American Century Investments.

Since the changes, Steelman said, participation has increased about 15 percent. More than 80,000 accounts, with more than $1 billion in assets, have been started by parents.

Though Money gave MOST high marks, it also expressed concerns because of fees that are assessed when a fund is started through an adviser or broker.

Steelman said reductions in brokers’ fees are coming. The program will have lower fees next quarter. She also said MOST is not using any of its funds to market itself.

Legacy

Missouri Treasurer Sarah Steelman said the Missouri General Assembly could do more to help parents save for college.

The Legacy Initiative, sponsored by Sen. Gary Nodler, R-Joplin, would have established a fund so parents with lower incomes could receive $500 to start a MOST account. That bill died the last day of the session.

“I would love for the Legislature to pass that initiative next year,” Steelman said. “It would encourage more lower-income parents to start saving for their children. It would help kids find a way to college that might not otherwise have the chance.”